RSG 3.31.2013 10-Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________ 
FORM 10-Q
 _________________________________________________________
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2013
OR
 
¨
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)
_________________________________________________________ 
DELAWARE
65-0716904
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
 
 
18500 NORTH ALLIED WAY
PHOENIX, ARIZONA
85054
(Address of principal executive offices)
(Zip code)

Registrant’s telephone number, including area code: (480) 627-2700
_________________________________________________________ 
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  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
Accelerated filer
¨
Non-accelerated filer
 ¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
On April 18, 2013, the registrant had outstanding 361,909,006 shares of Common Stock, par value $.01 per share (excluding treasury shares of 46,503,465).


Table of Contents

REPUBLIC SERVICES, INC.
INDEX
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 

2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

REPUBLIC SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
 
March 31,
2013
 
December 31,
2012
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
130.1

 
$
67.6

Accounts receivable, less allowance for doubtful accounts of $42.8 and $45.3, respectively
821.9

 
836.6

Prepaid expenses and other current assets
153.1

 
209.3

Deferred tax assets
118.2

 
117.8

Total current assets
1,223.3

 
1,231.3

Restricted cash and marketable securities
164.3

 
164.2

Property and equipment, net
6,946.8

 
6,910.3

Goodwill
10,696.9

 
10,690.0

Other intangible assets, net
343.1

 
358.7

Other assets
264.7

 
262.4

Total assets
$
19,639.1

 
$
19,616.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
464.3

 
$
474.5

Notes payable and current maturities of long-term debt
25.1

 
19.4

Deferred revenue
314.1

 
313.2

Accrued landfill and environmental costs, current portion
189.4

 
195.5

Accrued interest
70.3

 
68.8

Other accrued liabilities
612.1

 
623.6

Total current liabilities
1,675.3

 
1,695.0

Long-term debt, net of current maturities
7,007.8

 
7,051.1

Accrued landfill and environmental costs, net of current portion
1,421.3

 
1,420.6

Deferred income taxes and other long-term tax liabilities
1,208.5

 
1,232.7

Self-insurance reserves, net of current portion
298.3

 
290.9

Other long-term liabilities
293.5

 
220.9

Commitments and contingencies

 

Stockholders’ equity:
 
 
 
Preferred stock, par value $0.01 per share; 50 shares authorized; none issued

 

Common stock, par value $0.01 per share; 750 shares authorized; 407.7 and 405.2 issued
   including shares held in treasury, respectively
4.1

 
4.1

Additional paid-in capital
6,654.0

 
6,588.9

Retained earnings
2,442.1

 
2,403.2

Treasury stock, at cost (46.3 and 44.1 shares, respectively)
(1,363.8
)
 
(1,287.1
)
Accumulated other comprehensive loss, net of tax
(4.7
)
 
(5.8
)
Total Republic Services, Inc. stockholders’ equity
7,731.7

 
7,703.3

Noncontrolling interests
2.7

 
2.4

Total stockholders’ equity
7,734.4

 
7,705.7

Total liabilities and stockholders’ equity
$
19,639.1

 
$
19,616.9


The accompanying notes are an integral part of these statements.

3

Table of Contents

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
 
 
Three Months Ended March 31,
 
2013
 
2012
Revenue
$
1,998.6

 
$
1,982.4

Expenses:
 
 
 
Cost of operations
1,223.1

 
1,203.2

Depreciation, amortization and depletion
209.6

 
213.7

Accretion
19.2

 
19.7

Selling, general and administrative
206.5

 
222.4

Negotiation and withdrawal costs - Central States Pension Fund
62.2

 
0.1

Gain on disposition of assets and impairments, net
(1.1
)
 
(3.6
)
Restructuring charges
4.9

 

Operating income
274.2

 
326.9

Interest expense
(89.6
)
 
(104.3
)
Loss on extinguishment of debt
(1.8
)
 

Interest income
0.3

 
0.3

Other income, net
0.2

 
0.2

Income before income taxes
183.3

 
223.1

Provision for income taxes
58.4

 
80.3

Net income
124.9

 
142.8

Net (income) loss attributable to noncontrolling interests
(0.3
)
 
0.1

Net income attributable to Republic Services, Inc.
$
124.6

 
$
142.9

Basic earnings per share attributable to Republic Services, Inc. stockholders:
 
 
 
Basic earnings per share
$
0.34

 
$
0.39

Weighted average common shares outstanding
362.7

 
371.0

Diluted earnings per share attributable to Republic Services, Inc. stockholders:
 
 
 
Diluted earnings per share
$
0.34

 
$
0.38

Weighted average common and common equivalent shares outstanding
364.1

 
372.5

Cash dividends declared per common share
$
0.235

 
$
0.220


The accompanying notes are an integral part of these statements.


4

Table of Contents

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 
 
Three Months Ended March 31,
 
2013
 
2012
Net income
$
124.9

 
$
142.8

Other comprehensive income, net of tax
 
 
 
Hedging activity:
 
 
 
   Settlements
0.9

 
0.3

   Realized gains reclassified into earnings
(0.5
)
 

   Unrealized gains
0.7

 
7.4

Pension activity:
 
 
 
   Change in funded status of pension plan obligations

 
(3.5
)
Other comprehensive income, net of tax
1.1

 
4.2

Comprehensive income
126.0

 
147.0

Comprehensive (income) loss attributable to noncontrolling interests
(0.3
)
 
0.1

Comprehensive income attributable to Republic Services, Inc.
$
125.7

 
$
147.1


The accompanying notes are an integral part of these statements.


5

Table of Contents

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in millions)
 
 
Republic Services, Inc. Stockholders’ Equity
 
 
 
Common Stock
 
Additional Paid-In
 
Retained
 
Treasury Stock
 
Accumulated
Other
Comprehensive (Loss) Income,
 
Noncontrolling
 
Shares
 
Amount
 
Capital
 
Earnings
 
Shares
 
Amount
 
Net of Tax
 
Interests
Balance as of December 31, 2012
405.2

 
$
4.1

 
$
6,588.9

 
$
2,403.2

 
(44.1
)
 
$
(1,287.1
)
 
$
(5.8
)
 
$
2.4

Net income

 

 

 
124.6

 

 

 

 
0.3

Other comprehensive income

 

 

 

 

 

 
1.1

 

Cash dividends declared

 

 

 
(84.9
)
 

 

 

 

Issuances of common stock
2.5

 

 
60.3

 

 

 

 

 

Stock-based compensation

 

 
4.8

 
(0.8
)
 

 

 

 

Purchase of common stock for treasury

 

 

 

 
(2.2
)
 
(76.7
)
 

 

Balance as of March 31, 2013
407.7

 
$
4.1

 
$
6,654.0

 
$
2,442.1

 
(46.3
)
 
$
(1,363.8
)
 
$
(4.7
)
 
$
2.7


The accompanying notes are an integral part of these statements.


6

Table of Contents

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

 
Three Months Ended March 31,
 
2013
 
2012
Cash provided by operating activities:
 
 
 
Net income
$
124.9

 
$
142.8

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Depreciation, amortization, depletion and accretion
228.8

 
233.4

Non-cash interest expense
11.8

 
17.2

Restructuring related charges
4.9

 

Stock-based compensation
7.7

 
8.0

Deferred tax (benefit) provision
(17.6
)
 
2.9

Provision for doubtful accounts, net of adjustments
2.9

 
7.2

Loss on extinguishment of debt
1.8

 

Gain on disposition of assets, net and asset impairments
(3.1
)
 
(7.8
)
Withdrawal liability - Central States Pension Fund
57.9

 

Environmental adjustments
5.8

 
(8.5
)
Excess income tax benefit from stock option exercises and other non-cash items
(0.1
)
 
(0.3
)
Change in assets and liabilities, net of effects from business acquisitions and divestitures:
 
 
 
Accounts receivable
18.8

 
10.5

Prepaid expenses and other assets
(4.3
)
 
(11.5
)
Accounts payable
(11.9
)
 
(44.1
)
Restructuring and synergy related expenditures
(7.2
)
 
(68.1
)
Capping, closure and post-closure expenditures
(26.7
)
 
(11.8
)
Remediation expenditures
(18.9
)
 
(13.6
)
Other liabilities
44.3

 
77.9

Cash provided by operating activities
419.8

 
334.2

Cash used in investing activities:
 
 
 
Purchases of property and equipment
(214.8
)
 
(274.2
)
Proceeds from sales of property and equipment
3.2

 
4.8

Cash used in business acquisitions and development projects, net of cash acquired
(10.2
)
 
(19.7
)
Cash proceeds from divestitures, net of cash divested
1.0

 
9.5

Change in restricted cash and marketable securities
(0.1
)
 
37.4

Other
(0.8
)
 
(0.1
)
Cash used in investing activities
(221.7
)
 
(242.3
)
Cash used in financing activities:
 
 
 
Proceeds from notes payable and long-term debt
702.9

 
564.3

Payments of notes payable and long-term debt
(745.5
)
 
(586.7
)
Fees paid to issue tax-exempt financings
(1.2
)
 

Issuances of common stock
59.9

 
27.0

Excess income tax benefit from stock option exercises
0.4

 
1.1

Purchases of common stock for treasury
(67.2
)
 
(9.0
)
Cash dividends paid
(84.9
)
 
(81.4
)
Cash used in financing activities
(135.6
)
 
(84.7
)
Increase in cash and cash equivalents
62.5

 
7.2

Cash and cash equivalents at beginning of period
67.6

 
66.3

Cash and cash equivalents at end of period
$
130.1

 
$
73.5


The accompanying notes are an integral part of these statements.


7

Table of Contents

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION
Republic Services, Inc., a Delaware corporation, and its subsidiaries (referred to collectively as Republic, we, us, our, or the company) is the second largest provider of non-hazardous solid waste collection, transfer, recycling and disposal services in the United States, as measured by revenue. We manage and evaluate our operations through three geographic regions — East, Central, and West, which we have identified as our reportable segments.
The accompanying unaudited consolidated financial statements include the accounts of Republic and its wholly owned and majority owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). We account for investments in entities in which we do not have a controlling financial interest under either the equity method or cost method of accounting, as appropriate. All material intercompany accounts and transactions have been eliminated in consolidation.
We have prepared these unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted. In the opinion of management, these financial statements include all adjustments that, unless otherwise disclosed, are of a normal recurring nature and necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of the results you can expect for a full year. You should read these financial statements in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the year ended December 31, 2012.
For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation. All dollar amounts in the tabular presentations are in millions, except per share amounts and unless otherwise noted.
Management’s Estimates and Assumptions
In preparing our financial statements, we make numerous estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. We must make these estimates and assumptions because certain information that we use is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methodologies. In preparing our financial statements, the more critical and subjective areas that deal with the greatest amount of uncertainty relate to our accounting for our long-lived assets, including recoverability, landfill development costs, and final capping, closure and post-closure costs; our valuation allowances for accounts receivable and deferred tax assets; our liabilities for potential litigation, claims and assessments; our liabilities for environmental remediation, employee benefit plans, deferred taxes and uncertain tax positions; our self-insurance reserves; and our estimates of the fair values of assets acquired and liabilities assumed in any acquisition. Each of these is discussed in more detail in our description of our significant accounting policies in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2012. Our actual results may differ significantly from our estimates.
New Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board issued an Accounting Standards Update to the Comprehensive Income Topic in the Accounting Standards Codifications. This update requires separate presentation of the components that are reclassified out of accumulated other comprehensive income either on the face of the financial statements or in the notes to the financial statements. This update also requires companies to disclose the income statement line items impacted by any significant reclassifications, such as the gains and losses on cash flow hedges and defined benefit pension adjustments. These items are required for both interim and annual reporting for public companies and became effective for Republic beginning with the first quarter 2013 Form 10-Q filing.

2. BUSINESS ACQUISITIONS AND RESTRUCTURING CHARGES

Acquisitions

We acquired various solid waste businesses during the three months ended March 31, 2013 and 2012. The purchase price paid for these acquisitions during those periods and the preliminary allocation of the purchase price as of March 31 follow:


8

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
2013
 
2012
Purchase price:
 
 
 
Cash used in acquisitions, net of cash acquired
$
10.2

 
$
19.7

Holdbacks
1.0

 

Total
11.2

 
19.7

Allocated as follows:
 
 
 
Working capital
0.2

 
(0.9
)
Property and equipment
2.4

 
4.4

Other liabilities, net
(0.4
)
 

Value of assets acquired and liabilities assumed
2.2

 
3.5

Excess purchase price to be allocated
$
9.0

 
$
16.2

Excess purchase price allocated as follows:
 
 
 
Other intangible assets
$
1.0

 
$
5.8

Goodwill
8.0

 
10.4

Total allocated
$
9.0

 
$
16.2


Substantially all of the goodwill and intangible assets recorded for these acquisitions are deductible for tax purposes. The pro forma effect of these acquisitions, individually and collectively, was not material.

Restructuring Charges

During 2012, we restructured our field and corporate operations to create a more efficient and competitive company. These changes included consolidating our field regions from four to three and our areas from 28 to 20, relocating office space, and reducing administrative staffing levels. During the three months ended March 31, 2013, we incurred $4.9 million of restructuring charges, which consisted of severance and other employee termination benefits, relocation benefits, and the closure of offices with lease agreements with non-cancellable terms. During the three months ended March 31, 2013, we paid $7.2 million related to these restructuring charges. As of March 31, 2013, $6.7 million remains accrued for severance and other employee termination benefits and lease exit costs. We expect to incur approximately $10 million of additional expense during the remainder of 2013 to complete such activities. Substantially all of these charges were or will be recorded in our corporate segment, and we expect the charges will be paid primarily during 2013.

3. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
A summary of the activity and balances in goodwill accounts by reporting segment follows:
 
 
 
Balance at December 31, 2012
 
Acquisitions
 
Adjustments to
Acquisitions
 
Balance at March 31, 2013
East
 
$
3,014.9

 
$
0.1

 
$
(0.2
)
 
$
3,014.8

Central
 
3,242.7

 
4.2

 
(0.5
)
 
3,246.4

West
 
4,432.4

 
3.7

 
(0.4
)
 
4,435.7

Total
 
$
10,690.0

 
$
8.0

 
$
(1.1
)
 
$
10,696.9


Other Intangible Assets, Net
Other intangible assets, net, include values assigned to customer relationships, franchise agreements, other municipal agreements, non-compete agreements and trade names, and are amortized over periods ranging from 1 to 23 years. A summary of the activity and balances by intangible asset type follows:

9

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
 
Gross Intangible Assets
 
Accumulated Amortization
 
Net Intangibles at March 31, 2013
 
Balance at December 31, 2012
 
Acquisitions
 
Balance at March 31, 2013
 
Balance at December 31, 2012
 
Additions
Charged
to
Expense
 
Balance at March 31, 2013
 
Customer relationships,
   franchise and other
   municipal agreements
$
579.0

 
$
0.5

 
$
579.5

 
$
(252.4
)
 
$
(14.2
)
 
$
(266.6
)
 
$
312.9

Trade names
30.0

 

 
30.0

 
(24.5
)
 
(1.5
)
 
(26.0
)
 
4.0

Non-compete agreements
20.4

 
0.5

 
20.9

 
(12.0
)
 
(0.7
)
 
(12.7
)
 
8.2

Other intangible assets
63.5

 

 
63.5

 
(45.3
)
 
(0.2
)
 
(45.5
)
 
18.0

Total
$
692.9

 
$
1.0

 
$
693.9

 
$
(334.2
)
 
$
(16.6
)
 
$
(350.8
)
 
$
343.1


4. OTHER ASSETS
Prepaid Expenses and Other Current Assets
A summary of prepaid expenses and other current assets as of March 31, 2013 and December 31, 2012 follows:
 
 
2013
 
2012
Inventories
$
35.1

 
$
34.5

Prepaid expenses
58.0

 
54.4

Other non-trade receivables
33.8

 
39.6

Income tax receivable
18.6

 
69.0

Commodity and fuel hedge asset
5.4

 
4.1

Other current assets
2.2

 
7.7

Total
$
153.1

 
$
209.3


Other Assets
A summary of other assets as of March 31, 2013 and December 31, 2012 follows:
 
 
2013
 
2012
Deferred financing costs
$
56.5

 
$
58.8

Deferred compensation plan
57.4

 
49.9

Notes and other receivables
18.3

 
17.9

Reinsurance receivable
50.4

 
59.7

Other
82.1

 
76.1

Total
$
264.7

 
$
262.4


5. OTHER LIABILITIES
Other Accrued Liabilities
A summary of other accrued liabilities as of March 31, 2013 and December 31, 2012 follows:
 

10

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
2013
 
2012
Accrued payroll and benefits
$
122.0

 
$
157.1

Accrued fees and taxes
111.2

 
124.2

Self-insurance reserves, current portion
134.1

 
135.5

Accrued dividends
84.9

 
84.9

Current tax liabilities
42.2

 
2.1

Accrued professional fees and legal settlement reserves
24.8

 
34.6

Restructuring liabilities
6.7

 
9.0

Other
86.2

 
76.2

Total
$
612.1

 
$
623.6


Other accrued liabilities include the fair value of fuel and commodity hedges of $1.8 million and $1.6 million as of March 31, 2013 and December 31, 2012, respectively.
Other Long-Term Liabilities
A summary of other long-term liabilities as of March 31, 2013 and December 31, 2012 follows:
 
 
2013
 
2012
Deferred compensation liability
$
57.2

 
$
50.0

Pension and other post-retirement liabilities
12.0

 
12.7

Legal settlement reserves
41.4

 
36.4

Ceded insurance reserves
50.4

 
59.7

Withdrawal liability - Central States Pension Fund
88.6

 
30.7

Other
43.9

 
31.4

Total
$
293.5

 
$
220.9


Self-Insurance Reserves
In general, our self-insurance reserves are recorded on an undiscounted basis. However, the self-insurance liabilities we acquired in the acquisition of Allied Waste Industries, Inc. (Allied) have been recorded at our estimate of fair value, and, therefore, have been discounted to present value using a rate of 9.75%. Discounted reserves are accreted to non-cash interest expense through the period they are paid.
Our liabilities for unpaid and incurred but not reported claims at March 31, 2013 (which include claims for workers’ compensation, general liability, vehicle liability and employee health care benefits) were $432.4 million and are included in other accrued liabilities and self-insurance reserves in our consolidated balance sheets. While the ultimate amount of claims incurred depends on future developments, we believe recorded reserves are adequate to cover the future payment of claims. However, it is 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 are recorded currently in earnings in the periods in which such adjustments are known.

6. LANDFILL AND ENVIRONMENTAL COSTS
As of March 31, 2013, we owned or operated 191 active solid waste landfills with total available disposal capacity of approximately 4.8 billion in-place cubic yards. Additionally, we have post-closure responsibility for 128 closed landfills.
Accrued Landfill and Environmental Costs
A summary of landfill and environmental liabilities as of March 31, 2013 and December 31, 2012 follows:
 

11

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
2013
 
2012
Final capping, closure and post-closure liabilities
$
1,053.4

 
$
1,052.4

Remediation
557.3

 
563.7

Total accrued landfill and environmental costs
1,610.7

 
1,616.1

Less: Current portion
(189.4
)
 
(195.5
)
Long-term portion
$
1,421.3

 
$
1,420.6


Final Capping, Closure and Post-Closure Costs
The following table summarizes the activity in our asset retirement obligation liabilities, which include liabilities for final capping, closure and post-closure, for the three months ended March 31:
 
 
2013
 
2012
Asset retirement obligation liabilities, beginning of year
$
1,052.4

 
$
1,037.0

Non-cash additions
8.1

 
8.2

Acquisitions/divestitures and other adjustments

 
(2.5
)
Asset retirement obligation adjustments
0.4

 
4.6

Payments
(26.7
)
 
(11.8
)
Accretion expense
19.2

 
19.7

Asset retirement obligation liabilities, end of period
1,053.4

 
1,055.2

Less: Current portion
(107.7
)
 
(89.0
)
Long-term portion
$
945.7

 
$
966.2


Annually, in the fourth quarter, we review, and update as necessary, our estimates of asset retirement obligations. However, if there are significant changes in the facts and circumstances related to a site during the year, we will update our assumptions prospectively in the period that we know all the relevant facts and circumstances.
The fair value of assets that are legally restricted for purposes of collateralizing certain of our final capping, closure and post-closure obligations was $54.9 million and $54.8 million as of March 31, 2013 and December 31, 2012, respectively. Such assets are included in restricted cash and marketable securities in our consolidated balance sheets.
Landfill Operating Expenses
In the normal course of business, we incur various operating costs associated with environmental compliance. These costs include, among other things, leachate treatment and disposal, methane gas and groundwater monitoring and systems maintenance, interim cap maintenance, costs associated with the application of daily cover materials, and the legal and administrative costs of ongoing environmental compliance. These costs are expensed as cost of operations in the periods in which they are incurred.
Environmental Remediation Liabilities
We accrue for remediation costs when they become probable and can be reasonably estimated. When there is a range of reasonable estimates of the costs associated with remediation of a site, we use the amount within the range that constitutes our best estimate. If no amount within the range appears to be a better estimate than any other, we use the amount that is at the low end of the range. It is reasonably possible that we will need to adjust the liabilities recorded for remediation to reflect the effects of new or additional information, to the extent such information impacts the costs, timing or duration of the required actions. If we used the reasonably possible high ends of our ranges, our aggregate potential remediation liability at March 31, 2013 would be approximately $374 million higher than the amounts recorded. Future changes in our estimates of the cost, timing or duration of the required actions could have a material adverse effect on our consolidated financial position, results of operations and cash flows.
The following table summarizes the activity in our environmental remediation liabilities for the three months ended March 31:
 

12

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
2013
 
2012
Remediation liabilities, beginning of year
$
563.7

 
$
543.7

Remediation adjustments
5.8

 
(8.5
)
Payments
(18.9
)
 
(13.6
)
Accretion expense (non-cash interest expense)
6.7

 
8.4

Remediation liabilities, end of period
557.3

 
530.0

Less: Current portion
(81.7
)
 
(93.6
)
Long-term portion
$
475.6

 
$
436.4


The following is a discussion of certain of our significant remediation matters:
Bridgeton Landfill.  During 2012, we encountered environmental issues at our closed Bridgeton Landfill in Missouri, and recorded a charge of $74.1 million to manage the remediation area and monitor the site.  As of March 31, 2012, the remediation liability for this site is $59.0 million.  We believe the remaining reasonably possible range of loss for remediation costs is $45 million to $235 million.       
Countywide Landfill. In September 2009, Republic Services of Ohio II, LLC entered into Final Findings and Orders with the Ohio Environmental Protection Agency that require us to implement a comprehensive operation and maintenance program to manage the remediation area at the Countywide Recycling and Disposal Facility. The remediation liability for this site recorded as of March 31, 2013 is $51.7 million, of which $4.5 million is expected to be paid during the next twelve months. We believe the remaining reasonably possible range of loss for remediation costs is $49 million to $70 million.

Congress Landfill. In August 2010, Congress Development Company agreed with the State of Illinois to have a Final Consent Order entered by the Circuit Court of Illinois, Cook County. Pursuant to the this order, we have agreed to continue to implement certain remedial activities at this site. The remediation liability for this site recorded as of March 31, 2013 is $83.7 million, of which $8.2 million is expected to be paid during the next twelve months. We believe the remaining reasonably possible range of loss for remediation costs is $53 million to $154 million.

7. DEBT
Our notes payable, capital leases and long-term debt as of March 31, 2013 and December 31, 2012 are listed in the following table in millions, and are presented net of unamortized discounts and the unamortized portion of adjustments to fair value recorded in purchase accounting. Original issue discounts and adjustments to fair value recorded in purchase accounting are amortized to interest expense over the term of the applicable instrument using the effective interest method.
 

13

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
 
 
 
March 31, 2013
 
December 31, 2012
Maturity
 
Interest Rate
 
Principal
 
Discount
 
Carry Value
 
Principal
 
Discount
 
Carry Value
Credit facilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Uncommitted revolver
 
Variable
 
$

 
$

 
$

 
$
13.9

 
$

 
$
13.9

April 2016
 
Variable
 

 

 

 
25.0

 

 
25.0

May 2017
 
Variable
 

 

 

 

 

 

Senior notes:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
May 2018
 
3.800
 
700.0

 
(0.2
)
 
699.8

 
700.0

 
(0.2
)
 
699.8

September 2019
 
5.500
 
650.0

 
(3.3
)
 
646.7

 
650.0

 
(3.4
)
 
646.6

March 2020
 
5.000
 
850.0

 
(0.1
)
 
849.9

 
850.0

 
(0.1
)
 
849.9

November 2021
 
5.250
 
600.0

 

 
600.0

 
600.0

 

 
600.0

June 2022
 
3.550
 
850.0

 
(2.2
)
 
847.8

 
850.0

 
(2.2
)
 
847.8

May 2023
 
4.750
 
550.0

 
(1.3
)
 
548.7

 
550.0

 
(1.3
)
 
548.7

March 2035
 
6.086
 
275.7

 
(24.8
)
 
250.9

 
275.7

 
(24.9
)
 
250.8

March 2040
 
6.200
 
650.0

 
(0.5
)
 
649.5

 
650.0

 
(0.5
)
 
649.5

May 2041
 
5.700
 
600.0

 
(3.3
)
 
596.7

 
600.0

 
(3.4
)
 
596.6

Debentures:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
May 2021
 
9.250
 
35.3

 
(1.8
)
 
33.5

 
35.3

 
(1.9
)
 
33.4

September 2035
 
7.400
 
165.3

 
(41.4
)
 
123.9

 
165.2

 
(41.4
)
 
123.8

Tax-exempt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 - 2035
 
0.160 - 5.625
 
1,096.7

 
(0.3
)
 
1,096.4

 
1,097.9

 
(0.4
)
 
1,097.5

Other:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 - 2046
 
5.000 - 11.900
 
89.1

 

 
89.1

 
87.2

 

 
87.2

Total Debt
 
 
 
$
7,112.1

 
$
(79.2
)
 
7,032.9

 
$
7,150.2

 
$
(79.7
)
 
7,070.5

Less: Current portion
 
 
 
 
 
 
 
(25.1
)
 
 
 
 
 
(19.4
)
Long-term portion
 
 
 
 
 
 
 
$
7,007.8

 
 
 
 
 
$
7,051.1


Loss on Extinguishment of Debt

During the three months ended March 31, 2013, we refinanced certain of our tax-exempt financings that resulted in a $1.8 million non-cash write-off of deferred issuance costs.

Credit Facilities

In May 2012, we amended and restated our $1.25 billion unsecured revolving credit facility due September 2013 (the Amended and Restated Credit Facility) to extend the maturity to May 2017. The Amended and Restated Credit Facility includes a feature that allows us to increase availability, at our option, by an aggregate amount up to $500 million through increased commitments from existing lenders or the addition of new lenders. At our option, borrowings under the Amended and Restated Credit Facility bear interest at a Base Rate, or a Eurodollar Rate, plus an applicable margin based on our Debt Ratings (all as defined in the agreements).

Contemporaneous with the execution of the Amended and Restated Credit Facility, we entered into Amendment No. 1 to our existing $1.25 billion unsecured credit facility (the Existing Credit Facility and, together with the Amended and Restated Credit Facility, the Credit Facilities) to reduce the commitments under the Existing Credit Facility to $1.0 billion and conform certain terms of the Existing Credit Facility to those of the Amended and Restated Credit Facility. Amendment No. 1 does not extend the maturity date under the Existing Credit Facility, which matures in April 2016.

In connection with entering into the Amended and Restated Credit Facility and Amendment No. 1 to the Existing Facility, the guarantees by our subsidiary guarantors with respect to the Amended and Restated Credit Facility and the Existing Credit Facility were released. As a result, the guarantees by our subsidiary guarantors with respect to all of Republic's outstanding

14

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

senior notes were automatically released. In addition, the guarantees by all of our subsidiary guarantors (other than Allied Waste Industries, Inc. and Allied Waste North America, Inc.) with respect to the 9.250% debentures and the 7.400% debentures issued by our subsidiary Browning-Ferris Industries, LLC (successor to Browning-Ferris Industries, Inc.) also were automatically released.

Our Credit Facilities are subject to facility fees based on applicable rates defined in the agreements and the aggregate commitments, regardless of usage. Availability under our Credit Facilities can be used for working capital, capital expenditures, letters of credit and other general corporate purposes. The agreements governing our Credit Facilities require us to comply with certain financial and other covenants. We may pay dividends and repurchase common stock if we are in compliance with these covenants. As of March 31, 2013, we had no borrowings under our Credit Facilities. As of December 31, 2012, we had $25.0 million of Eurodollar Rate borrowings at an interest rate of 1.32%. We had $730.6 million and $909.4 million of letters of credit using availability under our Credit Facilities, leaving $1,519.4 million and $1,315.6 million of availability under our Credit Facilities at March 31, 2013 and December 31, 2012, respectively.

In March 2012, we entered into a new $75.0 million uncommitted, unsecured credit facility agreement (the Uncommitted Credit Facility) bearing interest at LIBOR, plus an applicable margin. In July 2012, we amended the Uncommitted Credit Facility to increase the size to $125.0 million, with all other terms remaining unchanged. Our Uncommitted Credit Facility also is subject to facility fees defined in the agreement, regardless of usage. We can use borrowings under the Uncommitted Credit Facility for working capital and other general corporate purposes. The agreements governing our Uncommitted Credit Facility require us to comply with certain covenants. The Uncommitted Credit Facility may be terminated by either party at any time. As of March 31, 2013, we had no borrowings under our Uncommitted Credit Facility.
Tax-Exempt Financings
As of March 31, 2013, approximately 85% of our tax-exempt financings are remarketed quarterly, weekly or daily by remarketing agents to effectively maintain a variable yield. Certain of these variable rate tax-exempt financings are credit enhanced with letters of credit having terms in excess of one year issued by banks with investment grade credit ratings. The holders of the bonds can put them back to the remarketing agents at the end of each interest period. To date, the remarketing agents have been able to remarket our variable rate unsecured tax-exempt bonds. These bonds have been classified as long term because of our ability and intent to refinance them using availability under our revolving Credit Facilities, if necessary.
Other Debt
Other debt includes capital lease liabilities of $88.9 million and $87.0 million as of March 31, 2013 and December 31, 2012, respectively, with maturities ranging from 2013 to 2046.
Fair Value of Debt
The fair value of our fixed rate senior notes was $6.8 billion and $6.9 billion at March 31, 2013 and December 31, 2012, respectively. The carrying value of our fixed rate senior notes was $5.8 billion and $5.8 billion at March 31, 2013 and December 31, 2012, respectively. The carrying amounts of our remaining notes payable and tax-exempt financings approximate fair value because interest rates are variable and, accordingly, approximate current market rates for instruments with similar risk and maturities. The fair value of our debt, using significant observable market inputs (Level 2), is determined as of the balance sheet date and is subject to change.
Guarantees
We have guaranteed some of the tax-exempt financings of our subsidiaries. If a subsidiary fails to meet its obligations associated with tax-exempt bonds as they come due, we will be required to perform under the related guarantee agreement. No additional liability has been recorded for these guarantees because the underlying obligations are reflected in our consolidated balance sheets.
Interest Rate Swap and Lock Agreements

From time to time, we enter into treasury and interest rate locks to manage exposure to fluctuations in interest rates in anticipation of future debt issuances. These transactions are accounted for as cash flow hedges. As of March 31, 2013 and 2012, no interest rate lock cash flow hedges were outstanding.

15

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As of March 31, 2013 and December 31, 2012, the effective portion of the interest rate locks, recorded as a component of accumulated other comprehensive income, was $24.2 million and $24.6 million, respectively. The effective portion of the interest rate locks will be amortized as an adjustment to interest expense over the life of the issued debt using the effective interest rate method. We expect to amortize $2.5 million over the next twelve months as a yield adjustment of our senior notes.
The effective portion of the interest rate locks amortized as a net increase to interest expense during the three months ended March 31, 2013 and 2012 was $0.6 million and $0.5 million, respectively.

8. INCOME TAXES
Our effective tax rate, exclusive of noncontrolling interests, for the three months ended March 31, 2013 and 2012 was 31.9% and 36.0%, respectively. The effective tax rate for the three months ended March 31, 2013 was favorably affected by the resolution of our 2009-2010 tax years with the IRS appeals division and subsequent review by the Congressional Joint Committee on Taxation. The effective tax rate for the three months ended March 31, 2012 was favorably affected by a change in estimated non-deductible penalties relating to certain legal settlements and adjustments resulting from filing amended state returns related to the December 2011 settlement of Allied's 2000-2003 tax years.
We record interim income tax expense based upon our anticipated full year effective income tax rate.
Cash paid for income taxes was a net refund of $14.0 million and $43.8 million for the three months ended March 31, 2013 and 2012, respectively. The net refund for the three months ended March 31, 2013 was driven primarily by the resolution of our 2009-2010 tax years. The net refund for the three months ended March 31, 2012 was due to a quick federal refund received related to a law change for bonus tax depreciation.
We recognize interest and penalties as incurred within the provision for income taxes in the consolidated statements of income. As of March 31, 2013, we have accrued a liability for penalties of $0.6 million and a liability for interest (including interest on penalties) of $13.6 million related to our uncertain tax positions.
We believe that our recorded liabilities for uncertain tax positions are adequate. However, a significant assessment against us in excess of the liabilities recorded could have a material adverse effect on our consolidated financial position, results of operations or cash flows.
During the next twelve months, it is reasonably possible that the amount of unrecognized tax benefits will increase or decrease. Gross unrecognized benefits that we expect to settle in the next twelve months are in the range of zero to $10 million.
We have deferred tax assets related to state net operating loss carryforwards for which we provide valuation allowances, as needed, due to uncertainty surrounding the future utilization of these carryforwards. When determining the need for a valuation allowance, we consider all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial results. In the period management determines it is more likely than not our state net operating loss carryforwards will or will not be recognized, we adjust the valuation allowance as necessary.

During the three months ended March 31, 2013, we have not changed our judgment regarding the future realizability of state net operating losses on which we provide a valuation allowance; however, we continue to monitor all positive and negative evidence and this may lead the company to change its judgment in a subsequent period.

9. STOCK-BASED COMPENSATION
Available Shares
In March 2011, our board of directors approved the Amended and Restated Republic Services, Inc. 2007 Stock Incentive Plan. The plan was ratified by our stockholders in May 2011. We currently have 16.6 million shares of common stock reserved for future grants under the plan.
Stock Options
The following table summarizes the stock option activity for the three months ended March 31, 2013:
 

16

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
Number of
Shares
 
Weighted Average
Exercise
Price per Share
 
Weighted Average
Remaining
Contractual Term
(years)
 
Aggregate
Intrinsic
Value
Outstanding at December 31, 2012
13.7

 
$
27.51

 
 
 
 
Granted
2.9

 
31.12

 
 
 
 
Exercised
(2.5
)
 
25.82

 
 
 
$
14.0

Forfeited or expired
(0.2
)
 
28.93

 
 
 
 
Outstanding at March 31, 2013
13.9

 
$
28.53

 
4.7
 
$
62.2

Exercisable at March 31, 2013
7.2

 
$
27.03

 
3.5
 
$
42.8


During the three months ended March 31, 2013 and 2012, compensation expense for stock options was $4.6 million and $4.6 million, respectively.
As of March 31, 2013, total unrecognized compensation expense related to outstanding stock options was $18.8 million, which will be recognized over a weighted average period of 2.1 years.
Other Stock Awards
The following table summarizes the restricted stock unit and restricted stock activity for the three months ended March 31, 2013: 
 
Number of
Restricted Stock
Units and Shares of
Restricted Stock
(in thousands)
 
Weighted Average
Grant Date
Fair Value per
Share
 
Weighted  Average
Remaining
Contractual
Term (years)
 
Aggregate
Intrinsic
Value
Other stock awards at December 31, 2012
905.3

 
$
27.51

 
 
 
 
Granted
312.7

 
30.33

 
 
 
 
Vested and issued
(59.7
)
 
27.14

 
 
 
 
Forfeited

 

 
 
 
 
Other stock awards at March 31, 2013
1,158.3

 
$
28.30

 
0.8
 
$
38.2

Vested and unissued at March 31, 2013
741.1

 
$
21.81

 
 
 
 

During the three months ended March 31, 2013, we awarded our non-employee directors 67,500 restricted stock units, which vested immediately. During the three months ended March 31, 2013, we awarded 237,721 restricted stock units to executives. In addition, 7,475 restricted stock units were earned as dividend equivalents. The restricted stock units do not carry any voting or dividend rights, except the right to receive additional restricted stock units in lieu of dividends.
The fair value of restricted stock units and restricted stock is based on the closing market price on the date of the grant. The compensation expense related to restricted stock units and restricted stock is amortized ratably over the vesting period.
During the three months ended March 31, 2013 and 2012, compensation expense related to restricted stock units and restricted stock totaled $3.1 million and $3.4 million, respectively.

10. STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE
We have had a share repurchase program since November 2010. From November 2010 to March 31, 2013, we repurchased 31.1 million shares of our stock for $892.5 million at a weighted average cost per share of $28.69. During the three months ended March 31, 2013, we repurchased 2.1 million shares of our stock for $67.0 million at a weighted average cost per share of $31.40. As of March 31, 2013, 0.3 million repurchased shares were pending settlement and $9.5 million was unpaid and included within other accrued liabilities.
We initiated a quarterly cash dividend in July 2003 and have increased it from time to time thereafter. In February 2013, the board of directors approved the quarterly dividend of $0.235 per share. Cash dividends declared were $84.9 million and $81.5

17

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

million for the three months ended March 31, 2013 and 2012, respectively. As of March 31, 2013, we recorded a quarterly dividend payable of $84.9 million to stockholders of record as of April 1, 2013.
Basic earnings per share is computed by dividing net income attributable to Republic Services, Inc. by the weighted average number of common shares (including restricted stock and vested but unissued restricted stock units) 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, unvested restricted stock and unvested restricted stock units. In computing diluted earnings per share, we use the treasury stock method.
Earnings per share for the three months ended March 31, 2013 and 2012 are calculated as follows (in thousands, except per share amounts): 
 
Three Months Ended
 
March 31,
 
2013
 
2012
Basic earnings per share:
 
 
 
Net income attributable to Republic Services, Inc.
$
124,600

 
$
142,900

Weighted average common shares outstanding
362,662

 
370,997

Basic earnings per share
$
0.34

 
$
0.39

Diluted earnings per share:
 
 
 
Net income attributable to Republic Services, Inc.
$
124,600

 
$
142,900

Weighted average common shares outstanding
362,662

 
370,997

Effect of dilutive securities:
 
 
 
Options to purchase common stock
1,373

 
1,415

Unvested restricted stock awards
57

 
78

Weighted average common and common equivalent
    shares outstanding
364,092

 
372,490

Diluted earnings per share
$
0.34

 
$
0.38

Antidilutive securities not included in the diluted earnings
    per share calculations:
 
 
 
Options to purchase common stock
2,473

 
5,673


11. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT

A summary of changes in accumulated other comprehensive income by component for the three months ended March 31, 2013 follows:
 
Gains and Losses on Cash Flow Hedges
 
Defined Benefit Pension Items
 
Total
Beginning balance, December 31, 2012
$
23.1

 
$
(17.3
)
 
$
5.8

Other comprehensive income before reclassifications
(1.6
)
 

 
(1.6
)
Amounts reclassified from accumulated other
   comprehensive income
0.5

 

 
0.5

Net current-period other comprehensive income
(1.1
)
 

 
(1.1
)
Ending balance, March 31, 2013
$
22.0

 
$
(17.3
)
 
$
4.7


A summary of reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2013 and 2012 follows:

18

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
 
Three Months Ended March 31,
 
 
 
 
 
2013
 
2012
 
 
 
Details about Accumulated Other Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income
 
Affected Line Item in the Statement Where Net Income is Presented
Gains (losses) on cash flow hedges:
 
 
 
 
 
 
 
Recycling commodity hedges
 
$
0.1

 
$
0.1

 
Revenue
Fuel hedges
 
1.3

 
0.4

 
Cost of operations
Interest rate contracts
 
(0.6
)
 
(0.5
)
 
Interest expense
 
 
0.8

 

 
Total before tax
 
 
(0.3
)
 

 
Tax (expense) or benefit
 
 
$
0.5

 
$

 
Net of tax

12. FINANCIAL INSTRUMENTS
Fuel Hedges
We have entered into multiple swap agreements designated as cash flow hedges to mitigate some of our exposure related to changes in diesel fuel prices. The swaps qualified for, and were designated as, effective hedges of changes in the prices of forecasted diesel fuel purchases (fuel hedges).
The following table summarizes our outstanding fuel hedges as of March 31, 2013:
 
Year
 
Remaining Gallons Hedged
 
Weighted Average Contract Price per Gallon
2013
 
20,490,000

 
$
3.81

2014
 
27,000,000

 
3.81

2015
 
9,000,000

 
3.73

2016
 
3,000,000

 
3.70


If the national U.S. on-highway average price for a gallon of diesel fuel as published by the Department of Energy exceeds the contract price per gallon, we receive the difference between the average price and the contract price (multiplied by the notional gallons) from the counter-party. If the average price is less than the contract price per gallon, we pay the difference to the counter-party.
The fair values of our fuel hedges are determined using standard option valuation models with assumptions about commodity prices being based on those observed in underlying markets (Level 2 in the fair value hierarchy). The aggregated fair values of our outstanding fuel hedges at March 31, 2013 and December 31, 2012 were current assets of $5.0 million and $3.1 million, and current liabilities of $0.1 million and $0.4 million, respectively, and have been recorded in other current assets and other accrued liabilities in our consolidated balance sheets, respectively. The ineffective portions of the changes in fair values resulted in (losses) gains of less than $0.1 million for the three months ended March 31, 2013 and 2012, respectively, and have been recorded in other income (expense), net in our consolidated statements of income.
The following table summarizes the impact of our fuel hedges on our comprehensive income for the three months ended March 31, 2013 and 2012:
 

19

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain (Loss)
Recognized in OCI on
Derivatives
(Effective Portion)
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Fuel hedges
 
$
1.3

 
$
7.7


Recycling Commodity Hedges

Our revenue from sales of recycling commodities is primarily from sales of old corrugated cardboard (OCC) and old newspaper (ONP). We use derivative instruments such as swaps and costless collars designated as cash flow hedges to manage our exposure to changes in prices of these commodities. We have entered into multiple agreements related to forecasted OCC and ONP sales. The agreements qualified for, and were designated as, effective hedges of changes in the prices of certain forecasted recycling commodity sales (commodity hedges).
We entered into costless collar agreements on forecasted sales of OCC and ONP. The agreements involve combining a purchased put option giving us the right to sell OCC and ONP at an established floor strike price with a written call option obligating us to deliver OCC and ONP at an established cap strike price. The puts and calls have the same settlement dates, are net settled in cash on such dates and have the same terms to expiration. The contemporaneous combination of options resulted in no net premium for us and represent costless collars. Under the agreements, we will make or receive no payments as long as the settlement price is between the floor price and cap price. However, if the settlement price is above the cap, we will pay the counterparty an amount equal to the excess of the settlement price over the cap times the monthly volumes hedged. Also, if the settlement price is below the floor, the counterparty will pay us the deficit of the settlement price below the floor times the monthly volumes hedged. The objective of these agreements is to reduce the variability of the cash flows of the forecasted sales of OCC and ONP between two designated strike prices.

The following costless collar hedges were outstanding as of March 31, 2013:
 
 
 
 
 
 
 
Weighted Average
Year
 
Transaction
Hedged
 
Remaining Tons Hedged
 
Floor
Strike Price
Per Short
Ton
 
Cap
Strike Price
Per Short
Ton
2013
 
OCC
 
166,500

 
$
85

 
$
131

2013
 
ONP
 
18,000

 
65

 
90


The costless collar hedges are recorded on the balance sheet at fair value. The fair values of the costless collars are determined using standard option valuation models with assumptions about commodity prices based upon forward commodity price curves in underlying markets (Level 2 in the fair value hierarchy).
The aggregated fair values of the outstanding recycling commodity hedges at March 31, 2013 and December 31, 2012 were current assets of $0.4 million and $1.0 million, respectively, and current liabilities of $1.7 million and $1.2 million, respectively, and have been recorded in other current assets and other accrued liabilities in our consolidated balance sheets, respectively. The ineffective portions of the changes in fair values resulted in (losses) gains of less than $0.1 million for the three months ended March 31, 2013 and 2012, respectively, and have been recorded in other income (expense), net in our consolidated statements of income.
The following table summarizes the impact of our recycling commodity hedges on our comprehensive income for the three months ended March 31, 2013 and 2012:
 

20

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Derivatives in Cash Flow Hedging Relationships
 
Amount of Gain (Loss)
Recognized in
OCI on
Derivatives
(Effective Portion)
 
 
 
Three Months Ended March 31,
 
 
 
2013
 
2012
 
Recycling commodity hedges
 
$
(0.6
)
 
$
(0.3
)
 

Fair Value Measurements
In measuring fair values of assets and liabilities, we use valuation techniques that maximize the use of observable inputs (Level 1) and minimize the use of unobservable inputs (Level 3). We also use market data or assumptions that we believe market participants would use in pricing an asset or liability, including assumptions about risk when appropriate.

As of March 31, 2013 and December 31, 2012, our assets and liabilities that are measured at fair value on a recurring basis include the following:
 
 
Fair Value Measurements Using
 
Total as of
March 31, 2013
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market mutual funds
$
62.3

 
$
62.3

 
$

 
$

Bonds
42.2

 

 
42.2

 

Fuel hedges - other current assets
5.0

 

 
5.0

 

Commodity hedges - other current assets
0.4

 

 
0.4

 

Total assets
$
109.9

 
$
62.3

 
$
47.6

 
$

Liabilities:
 
 
 
 
 
 
 
Fuel hedges - other accrued liabilities
0.1

 

 
0.1

 

Commodity hedges - other accrued liabilities
1.7

 

 
1.7

 

Total liabilities
$
1.8

 
$

 
$
1.8

 
$

 
Fair Value Measurements Using
 
Total as of December 31, 2012
 
Quoted
Prices in
Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Money market mutual funds
$
62.8

 
$
62.8

 
$

 
$

Bonds
40.1

 

 
40.1

 

Fuel hedges - other current assets
3.1

 

 
3.1

 

Commodity hedges - other current assets
1.0

 

 
1.0

 

Total assets
$
107.0

 
$
62.8

 
$
44.2

 
$

Liabilities:
 
 
 
 
 
 
 
Fuel hedges - other accrued liabilities
$
0.4

 
$

 
$
0.4

 
$

Commodity hedges - other accrued liabilities
1.2

 

 
1.2

 

Total liabilities
$
1.6

 
$

 
$
1.6

 
$




21

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

13. SEGMENT REPORTING
Our operations are managed and evaluated through three regions: East, Central and West. These three regions are presented below as our reportable segments. The historical results, discussion and presentation of our reportable segments as set forth in our consolidated financial statements for all periods presented reflect the impact of the realignment of our operating structure in the fourth quarter of 2012. These reportable segments provide integrated waste management services consisting of collection, transfer, recycling and disposal of non-hazardous solid waste.
Summarized financial information concerning our reportable segments for the three months ended March 31, 2013 and 2012 is shown in the following tables:
 
 
Gross
Revenue
 
Intercompany
Revenue
 
Net
Revenue
 
Depreciation,
Amortization,
Depletion and
Accretion
 
Operating
Income
(Loss)
 
Capital
Expenditures
 
Total Assets
Three Months Ended March 31, 2013
 
 
 
 
 
 
 
 
 
 
East
$
693.8

 
$
(95.5
)
 
$
598.3

 
$
61.4

 
$
115.5

 
$
32.2

 
$
4,891.7

Central
711.2

 
(128.7
)
 
582.5

 
72.5

 
112.5

 
44.0

 
5,650.2

West
967.4

 
(171.8
)
 
795.6

 
82.8

 
171.3

 
54.6

 
8,206.9

Corporate entities
25.4

 
(3.2
)
 
22.2

 
12.1

 
(125.1
)
 
84.0

 
890.3

Total
$
2,397.8

 
$
(399.2
)
 
$
1,998.6

 
$
228.8

 
$
274.2

 
$
214.8

 
$
19,639.1

Three Months Ended March 31, 2012
 
 
 
 
 
 
 
 
 
 
East
$
699.1

 
$
(94.8
)
 
$
604.3

 
$
59.9

 
$
120.7

 
$
67.2

 
$
4,910.6

Central
712.6

 
(127.3
)
 
585.3

 
72.2

 
106.5

 
44.6

 
5,558.9

West
926.3

 
(158.7
)
 
767.6

 
82.0

 
163.4

 
93.1

 
8,188.4

Corporate entities
28.6

 
(3.4
)
 
25.2

 
19.3

 
(63.7
)
 
69.3

 
798.0

Total
$
2,366.6

 
$
(384.2
)
 
$
1,982.4

 
$
233.4

 
$
326.9

 
$
274.2

 
$
19,455.9


Intercompany revenue reflects transactions within and between segments that are generally made on a basis intended to reflect the market value of such services.
Corporate functions include legal, tax, treasury, information technology, risk management, human resources, corporate accounts, closed landfills and other administrative functions. Capital expenditures for corporate entities primarily include vehicle inventory acquired but not yet assigned to operating locations and facilities.
The following table shows our total reported revenue by service line for the three months ended March 31, 2013 and 2012 (in millions of dollars and as a percentage of revenue):

22

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

 
 
Three Months Ended March 31,
 
2013
 
2012
Collection:
 
 
 
 
 
 
 
Residential
$
535.2

 
26.8
%
 
$
530.9

 
26.8
%
Commercial
643.3

 
32.2

 
621.1

 
31.3

Industrial
376.8

 
18.8

 
367.7

 
18.5

Other
8.3

 
0.4

 
7.9

 
0.4

Total collection
1,563.6

 
78.2

 
1,527.6

 
77.0

Transfer
233.3

 
 
 
225.9

 
 
Less: Intercompany
(141.8
)
 
 
 
(135.3
)
 
 
Transfer, net
91.5

 
4.6

 
90.6

 
4.6

Landfill
431.6

 
 
 
447.7

 
 
Less: Intercompany
(207.2
)
 
 
 
(207.6
)
 
 
Landfill, net
224.4

 
11.2

 
240.1

 
12.1

Sale of recyclable materials
88.0

 
4.4

 
91.2

 
4.6

Other non-core
31.1

 
1.6

 
32.9

 
1.7

Other
119.1

 
6.0

 
124.1

 
6.3

Total revenue
$
1,998.6

 
100.0
%
 
$
1,982.4

 
100.0
%

Other revenue consists primarily of revenue from National Accounts. National Accounts revenue included in other revenue represents the portion of revenue generated from nationwide contracts in markets outside our operating areas where the associated waste handling services are subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs which are recorded in cost of operations.

14. COMMITMENTS AND CONTINGENCIES
General Legal Proceedings
We are subject to extensive and evolving laws and regulations and have implemented safeguards to respond to regulatory requirements. In the normal course of our business, we become involved in legal proceedings. Some of these actions may result in fines, penalties or judgments against us, which may impact earnings and cash flows for a particular period. Although we cannot predict the ultimate outcome of any legal matter with certainty, except as described below we do not believe the outcome of our pending legal proceedings will have a material adverse impact on our consolidated financial position, results of operations or cash flows.
As used herein, the term legal proceedings refers to litigation and similar claims against us and our subsidiaries, excluding: (1) ordinary course accidents, general commercial liability and workers compensation claims, which are covered by insurance programs, subject to customary deductibles, and which, together with self-insured employee health care costs, are discussed in Note 5, Other Liabilities; and (2) environmental remediation liabilities, which are discussed in Note 6, Landfill and Environmental Costs.
We accrue for legal proceedings when losses become probable and reasonably estimable. We have recorded an aggregate accrual of approximately $63 million relating to our outstanding legal proceedings as of March 31, 2013, including those described herein and others not specifically identified herein. As of the end of each applicable reporting period, we review each of our legal proceedings and, where it is probable that a liability has been incurred, we accrue for all probable and reasonably estimable losses. Where we are able to reasonably estimate a range of losses we may incur with respect to such a matter, we record an accrual for the amount within the range that constitutes our best estimate. If we are able to reasonably estimate a range but no amount within the range appears to be a better estimate than any other, we use the amount that is the low end of such range. If we used the high ends of such ranges, our aggregate potential liability would have been approximately $112 million higher than the amount recorded as of March 31, 2013.


23

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Countywide Matters
As is discussed in Note 6, Landfill and Environmental Costs, in September 2009, Republic Services of Ohio II, LLC (Republic-Ohio) entered into Final Findings and Orders with the Ohio Environmental Protection Agency that require us to implement a comprehensive operation and maintenance program to manage the remediation area at the Countywide Recycling and Disposal Facility. The remediation liability for the landfill recorded as of March 31, 2013 is $51.7 million, of which $4.5 million is expected to be paid during the next twelve months. We believe the remaining reasonably possible range of loss for remediation costs is $49 million to $70 million.
In a suit filed on October 8, 2008 in the Tuscarawas County Ohio Court of Common Pleas, approximately 700 individuals and businesses located in the area around the Countywide Recycling and Disposal Facility sued Republic Services, Inc. (Republic), Republic Services of Ohio II, LLC (Republic-Ohio), Waste Management, Inc. (WMI) and Waste Management Ohio, Inc. (WMO) for alleged negligence and nuisance. Plaintiffs allege that the landfill has generated odors and other unsafe emissions that have impaired the use and value of their property and may have adverse health effects. A second almost identical lawsuit was filed by approximately 82 plaintiffs on October 13, 2009 in the Tuscarawas County Ohio Court of Common Pleas against Republic, Republic-Ohio, WMI and WMO. The court consolidated the two actions. The relief requested on behalf of each plaintiff in the consolidated action is: (1) an award of compensatory damages according to proof in an amount in excess of $25,000 for each of the three counts of the amended complaint; (2) an award of punitive damages in the amount of two times compensatory damages, pursuant to applicable statute, or in such amount as may be awarded at trial for each of the three counts of the amended complaint; (3) interest on the damages according to law; (4) costs and disbursements of the lawsuit; (5) reasonable fees for attorneys and expert witnesses; and (6) any further relief the court deems just, proper and equitable. As a result of various dismissals of plaintiffs, this case presently consists of approximately 600 plaintiffs. Republic, WMI and WMO have been dismissed from the litigation. On March 4, 2013, we entered into a binding memorandum of understanding to settle this case. The completion of the settlement remains subject to certain conditions.
Luri Matter

On August 17, 2007, a former employee, Ronald Luri, sued Republic Services, Inc., Republic Services of Ohio Hauling LLC, Republic Services of Ohio I LLC, Jim Bowen and Ron Krall in the Cuyahoga County Common Pleas Court in Ohio. Plaintiff alleges that he was unlawfully fired in retaliation for refusing to discharge or demote three employees who were all over 50 years old. On July 3, 2008, a jury verdict was awarded against us in the amount of $46.6 million, including $43.1 million in punitive damages. On September 24, 2008, the court awarded pre-judgment interest of $0.3 million and attorney fees and litigation costs of $1.1 million. Post-judgment interest accrued or will accrue at a rate of 8% for 2008, 5% for 2009, 4% for 2010 and 2011, and 3% for 2012 and 2013. We appealed to the Court of Appeals, and on May 19, 2011 the court reduced the punitive damages award to $7.0 million. Plaintiff appealed to the Ohio Supreme Court, challenging the reduction of punitive damages. We cross-appealed, seeking a new trial on the ground that the proceedings in the trial court violated Ohio's punitive damages statute, which requires that the compensatory and punitive damages phases of trial be bifurcated in certain types of cases. On February 15, 2012, in a case called Havel v. Villa St. Joseph, the Ohio Supreme Court upheld the constitutionality of the bifurcation requirement. On July 3, 2012, the Ohio Supreme Court reversed the judgment against us and remanded the case for application of its decision in Havel. Plaintiff filed a motion for reconsideration/clarification, which the Ohio Supreme Court denied. Plaintiff then filed a motion for additional briefing before the Court of Appeals. The Court of Appeals denied the request and remanded the case to the Cuyahoga County Common Pleas Court for application of Havel.
Congress Development Landfill Matters
Congress Development Co. (CDC) is a general partnership that owns and operates the Congress Landfill. The general partners in CDC are our subsidiary, Allied Waste Transportation, Inc. (Allied Transportation), and an unaffiliated entity, John Sexton Sand & Gravel Corporation (Sexton). Sexton was the operator of the landfill through early 2007, when Allied Transportation took over as the operator. The general partners likely will be jointly and severally liable for the costs associated with the following matters relating to the Congress Landfill.
As is discussed in Note 6, Landfill and Environmental Costs, in August 2010, CDC agreed with the State of Illinois to have a Final Consent Order (Final Order) entered by the Circuit Court of Illinois, Cook County. Pursuant to the Final Order, we have agreed to continue to implement certain remedial activities at the landfill. The remediation liability for the landfill recorded as of March 31, 2013 is $83.7 million, of which $8.2 million is expected to be paid during the next twelve months. We believe the remaining reasonably possible range of loss for remediation costs is $53 million to $154 million.

24

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

In a suit originally filed on December 23, 2009 in the Circuit Court of Cook County, Illinois and subsequently amended to add additional plaintiffs, approximately 2,950 plaintiffs sued our subsidiaries Allied Transportation and Allied Waste Industries, Inc. (Allied), CDC and Sexton. The court entered an order dismissing Allied without prejudice on October 26, 2010. The plaintiffs allege bodily injury, property damage and inability to have normal use and enjoyment of property arising from, among other things, odors and other damages arising from landfill gas leaking, and they base their claims on negligence, trespass, and nuisance. On January 6, 2012, the court took plaintiffs' motion for leave to amend their complaint to seek punitive damages under advisement, to be considered on a plaintiff-by-plaintiff basis. The court also granted plaintiffs leave to serve discovery on the punitive damages issue. Following the court's order in our favor striking the plaintiffs' allegations requesting actual damages in excess of $50 million and punitive damages in excess of $50 million, the amount of damages being sought is unspecified. Discovery is ongoing.

Multiemployer Pension Plans
We contribute to 27 multiemployer pension plans under collective bargaining agreements (CBAs) covering union-represented employees. Approximately 20% of our total current employees are participants in such multiemployer plans. These plans generally provide retirement benefits to participants based on their service to contributing employers. We do not administer these plans. In general, these plans are managed by a board of trustees with the unions appointing certain trustees and other contributing employers of the plan appointing certain members. We generally are not represented on the board of trustees.
Under current law regarding multiemployer pension plans, a plan’s termination, and any termination of an employer’s obligation to make contributions, including our voluntary withdrawal (which we consider from time to time) or the mass withdrawal of all contributing employers from any under-funded multiemployer pension plan (each, a Withdrawal Event) would require us to make payments to the plan for our proportionate share of the plan’s unfunded vested liabilities. During the course of operating our business, we incur Withdrawal Events with respect to certain of our multiemployer pension plans. We accrue for such events when losses become probable and reasonably estimable. We cannot assure you that there will not be a Withdrawal Event, where the amounts we would be required to contribute would have a material adverse impact on our consolidated financial condition, results of operations or cash flows.
Central States, Southeast and Southwest Areas Pension Fund
We have CBAs with local bargaining units of the Teamsters under which we have obligations to contribute to the Central States, Southeast and Southwest Areas Pension Fund (the Fund). A majority of these CBAs will be under negotiation during 2013. As part of our CBA negotiations, we have withdrawn, proposed or intend to propose to withdraw from the Fund. Withdrawal is only one of the issues in these negotiations, and we do not know what the ultimate outcome of the negotiations in any locale will be. With respect to each CBA, if we do withdraw, this will constitute a Withdrawal Event and will require us to make payments to the Fund for a proportionate share of its unfunded vested liabilities.

In 2012, we withdrew recognition of the Teamsters as the designated representative of our employees in our Danville, Illinois facility and employees in our Dayton, Ohio facility ratified a new CBA that includes a provision terminating our obligation to contribute to the Fund. Each of these actions constitutes a Withdrawal Event. Based on information provided to us by the Fund, our actuarial calculations and a number of other variable factors including our estimated number of 2013 contribution based units, we estimated our 2012 liability to the Fund associated with these two Withdrawal Events to be approximately $31 million, which we charged to earnings in 2012.
In the first quarter of 2013, employees at three of our locations in Michigan separately ratified new CBAs that no longer provide for participation in the Fund. Each of these actions constitutes a Withdrawal Event. Based on information provided to us by the Fund, our actuarial calculations and a number of other variable factors including our estimated number of 2013 contribution based units, we have estimated our liability associated with these three Withdrawal Events will be approximately $58 million, which we charged to earnings during the three months ended March 31, 2013.
If we have an additional Withdrawal Event or Events with respect to one or more of the remaining bargaining units, the amount ultimately payable would depend upon a number of variable factors involving valuations and actuarial calculations. We do not presently know what the result of those calculations and valuations would be. However, based on our current estimates, we believe our additional liability for a complete 2013 withdrawal from the Fund would be approximately $75 million. In the future, a loss may become probable, at which time or times we will incur an expense that will reduce earnings. Any such expense may be material to our results of operations in the period or periods incurred. The liability associated with any such expense or expenses ordinarily would be due in installments over a period of 20 years, and the payments are unlikely to be material to our cash flow in any particular period.

25

Table of Contents
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Based on information received from the 27 multiemployer pension plans to which we contribute, we believe that our potential liability in the event of a complete withdrawal from the Fund is (a) much greater than our potential liability in the event of a complete withdrawal from any of the 26 other multiemployer pension plans in which we participate and (b) greater than our potential aggregate liability in the event of complete withdrawal from all the 20 other multiemployer pension plans to which we contribute and that are either “critical” or “endangered” as those terms are defined in the Pension Protection Act.
For additional discussion and detail regarding multiemployer pension plans, see Note 11, Employee Benefit Plans, to our consolidated financial statements in Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
Restricted Cash and Marketable Securities
Our restricted cash and marketable securities include, among other things, restricted cash and marketable securities held for capital expenditures under certain debt facilities, and restricted cash and marketable securities pledged to regulatory agencies and governmental entities as financial guarantees of our performance related to our final capping, closure and post-closure obligations at our landfills. The following table summarizes our restricted cash and marketable securities:
 
 
March 31,
2013
 
December 31, 2012
Financing proceeds
$
24.1

 
$
24.7

Capping, closure and post-closure obligations
54.9

 
54.8

Self-insurance
82.9

 
81.3

Other
2.4

 
3.4

Total restricted cash and marketable securities
$
164.3

 
$
164.2


Off-Balance Sheet Arrangements
We have no off-balance sheet debt or similar obligations, other than operating leases and the financial assurances, which are not classified as debt. We have no transactions or obligations with related parties that are not disclosed, consolidated into or reflected in our reported financial position or results of operations. We have not guaranteed any third-party debt.


26

Table of Contents

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You should read the following discussion in conjunction with the unaudited consolidated financial statements and notes thereto included under Item 1. In addition, you should refer to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year ended December 31, 2012.
Overview
We are the second largest provider of services in the domestic non-hazardous solid waste industry, as measured by revenue. Our operations are in 39 states and Puerto Rico. We provide non-hazardous solid waste collection services for commercial, industrial, municipal and residential customers through 336 collection operations. We own or operate 196 transfer stations, 191 active solid waste landfills and 70 recycling centers. We also operate 69 landfill gas and renewable energy projects.
Revenue for the three months ended March 31, 2013 increased by 0.8% to $1,998.6 million compared to $1,982.4 million for the same period in 2012. This change in revenue is due to increases in core price of 1.2%, fuel recovery fees of 0.3% and acquisitions, net of divestitures of 0.5%, partially offset by decreases in volume of 1.0% (including 0.5% due to one less workday) and recycling commodities of 0.2%.
The following table summarizes our revenue, costs and expenses for the three months ended March 31, 2013 and 2012 (in millions of dollars and as a percentage of revenue):
 
 
 
Three Months Ended March 31,
 
 
 
2013
 
 
2012
 
Revenue
 
$
1,998.6

 
100.0

%
 
$
1,982.4

 
100.0

%
Expenses:
 
 
 
 
 
 
 
 
 
 
Cost of operations
 
1,223.1

 
61.2

 
 
1,203.2

 
60.7

 
Depreciation, amortization and depletion of property and
    equipment
 
192.3

 
9.6

 
 
196.0

 
9.9

 
Amortization of other intangible assets and other assets
 
17.3

 
0.9

 
 
17.7

 
0.9

 
Accretion
 
19.2

 
1.0

 
 
19.7

 
1.0

 
Selling, general and administrative
 
206.5

 
10.3

 
 
222.4

 
11.2

 
Negotiation and withdrawal costs - Central States
    Pension Fund
 
62.2

 
3.1

 
 
0.1

 

 
Gain on disposition of assets and impairments, net
 
(1.1
)
 
(0.1
)
 
 
(3.6
)
 
(0.2
)
 
Restructuring charges
 
4.9

 
0.3

 
 

 

 
Operating income
 
$
274.2

 
13.7

%
 
$
326.9

 
16.5

%
 
 
 
 
 
 
 
 
 
 
 

Our pre-tax income was $183.3 million for the three months ended March 31, 2013 versus $223.1 million for the comparable 2012 period. Our net income attributable to Republic Services, Inc. was $124.6 million for the three months ended March 31, 2013 or $0.34 per diluted share versus $142.9 million or $0.38 per diluted share for the comparable 2012 period, respectively.
During each of the three months ended March 31, we recorded a number of charges and other expenses and benefits that impacted our pre-tax income, net income attributable to Republic Services, Inc. (Net Income — Republic) and diluted earnings per share as noted in the following table (in millions, except per share data). Additionally, see our "Cost of Operations," “Selling, General and Administrative Expenses” and “Income Taxes” discussions contained in the Results of Operations section of this Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of other items that impacted our earnings.
 

27

Table of Contents

 
 
Three Months Ended March 31, 2013
 
 
Three Months Ended March 31, 2012
 
 
 
 
Net
 
Diluted
 
 
 
 
Net
 
Diluted
 
 
Pre-tax
 
Income -
 
Earnings
 
 
Pre-tax
 
Income -
 
Earnings