Republic Services, Inc.
Q2 2015 Earnings Call Transcript

Published: 24 Jul 2015

[Operator:]

Good afternoon, and welcome to the Second Quarter 2015 Call for Investors in Republic Services. Republic Services is traded on the New York Stock Exchange under the symbol RSG. Today's call is being recorded and all participants are in a listen-only mode. There will be a question-and-answer session following the Republic summary of quarterly earnings. It is now my pleasure to turn the call over to Mr. DelGhiaccio. Good afternoon, Mr. DelGhiaccio.

[Brian M. DelGhiaccio:]

Good afternoon, and thank you for joining us. This is Brian DelGhiaccio and I would like to welcome everyone to Republic Services' second quarter 2015 conference call. Don Slager, our CEO, and Chuck Serianni, our CFO, are joining me as we discuss our performance. Before we get started, I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward-looking statements, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from our expectations. The material that we discuss today is time-sensitive. If in the future you listen to a rebroadcast or a recording of this conference call, you should be sensitive to the date of the original call, which is July 23, 2015. Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited. I want to point out that our SEC filings, our earnings press release which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are all available on Republic's website at republicservices.com. And finally, I want to remind you that Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times and presentations are posted on our website, along with instructions for listening to the live webcast of the events. With that, I would like to turn the call over to Don.

[Donald W. Slager:]

Thanks, Brian. Good afternoon everyone, and thank you for joining us. The Republic team continued our strong start to the year and delivered another solid quarter. We achieved higher levels of core price and average yield, profitably increased volumes, made continued progress against our multiyear initiatives, and reported earnings and free cash flow growth. We continue to see positive momentum in our business from successfully executing our strategy and a steady improvement in solid waste trends. Some of our second quarter and year-to-date highlights include

[Charles F. Serianni:]

Thanks, Don. Second quarter 2015 revenue was approximately $2.3 billion, an increase of $82 million over the prior year. This 3.7% increase in revenue includes internal growth of 1% and acquisitions of 2.7%. The components of internal growth are as follows

[Donald W. Slager:]

Thanks Chuck. In closing, we continue to see a broad and sustained recovery in our solid waste business. Improving fundamentals, together with solid operational execution, have resulted in EPS and free cash flow growth and margin expansion. I am proud of how we continue to execute our business plan, and our strong performance reflects the hard work from the entire Republic team. We continue to manage the business to create long-term value and remain focused on executing our strategy. At this time, operator, I would like to open the call to questions.

[Operator:]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. First question will come from Tyler Brown with Raymond James. Your line is open.

[Patrick Tyler Brown:]

Hey, good afternoon guys.

[Donald W. Slager:]

Hey, Tyler.

[Patrick Tyler Brown:]

Hey, so Chuck, you kind of hit on this, but it looks like the overall EBITDA margins were roughly flat if you take in totality, and I guess that doesn't really jive with the 2.4% average yield. You know, I would expect to see some margin expansion with pricing over 2%, especially when you are growing volumes and fuel falling. My hunch is that Tervita kind of mixed away some of the good things in core solid waste. Is there any way that you could isolate or give us some numbers around what the core solid waste margins did?

[Charles F. Serianni:]

Yes, sure Tyler. So quarter-over-quarter, solid waste, which includes yield obviously, was up about 60 basis points, so very solid growth from that portion of the business. You know recycling, as we have talked about, was a headwind of about 30 basis points. And then E&P, obviously Tervita, including integration costs, is a negative about 30 basis points, and that's what gets you to kind of flat year-over-year.

[Patrick Tyler Brown:]

Excellent, very good. And then I also, I kind of want to – I get it that about 50% of your market is in the restricted piece, and let's call it 50% in the open, and I know 60% of the restricted is in CPI, but actually I want to ask about the other 40% that isn't tied directly in with CPI, but it is "restricted." So can you kind of help us understand what we should expect core pricing trends to be in that bucket as we move out to 2016, and what really moves that piece of the business?

[Donald W. Slager:]

All right, so let's put the pieces together, right? So half of our revenue is restricted, half of it is open market. Of the restricted piece, we say 60% of that is tied to some kind of an index, right? We will come back to that. The rest that's restricted is, it might be a fixed price increase, it might be not tied to an index but have a 2%, 3%, 4% increase already built into the contract. And those might be large industrial accounts, they could be national accounts, things like that. So you know, what moves the pricing in that part of the business is just our further commitment to pricing intelligently our business and knowing when to walk away from business. You know we mentioned, Chuck mentioned in his results that – or in his comments that one of the things that impacted volume was some loss of some national account business and some broker business that we define as non-regrettable. So, you know, we're going to continue to look at business, and all customers aren't created equally. So the capture tool, the PBS training that we talked about, all those things are proving valuable throughout our business, we are going to continue to move price. We think now with what we've been seeing that price for the full year will be closer to 2% based on all of these actions.

[Patrick Tyler Brown:]

Okay, perfect. So that restricted piece that's not tied to CPI doesn't necessarily move in sympathy with CPI, its actually fairly independent? Okay.

[Donald W. Slager:]

It is somewhat independent, and again there are many different versions of contracts within that bucket, but we're basically taking our same sort of core philosophy on pricing throughout our business.

[Patrick Tyler Brown:]

Okay perfect. Thank you.

[Operator:]

Our next question comes from Scott Levine with Imperial Capital. Your line is open.

[Scott J. Levine:]

Okay, good afternoon guys.

[Donald W. Slager:]

Hi, Scott.

[Scott J. Levine:]

So I guess you mentioned use of these revenue enhancing initiatives kind of driving some of your ability to get price and volume and better rate than you guys have I think over the last few years. I was hoping you might to be able to elaborate on that a bit more. The pricing metrics in particular over the last couple quarters have been surprisingly good. Is there anything going on in the marketplace that is driving this, or is it more internal in your opinion?

[Donald W. Slager:]

No, I think there's a lot going on. Let's talk first about our efforts, right? So we have put an incredible focus on customer experience, on service delivery, on our fleet initiatives, so our fleet is more reliable today, our customer delivery is better, we think we're extending customer loyalty, and we think we're earning that price increase more easily from our customers. So that's at work. I think we are easier to do business with than we were a year and two years ago. So we are increasing the value proposition, that's part of it. We are going out with higher price increases. We've got more confidence in earning that price increase, or asking for little higher price in the open market and getting it. Specifically also on the recycling business in the open market, with the way that recycling commodity prices dropped pretty quickly in the first half of the year, we went right to work on pricing that open market recycling business, and as we said in our comments, we've moved the prices up substantially in that segment. So that's driving it. Certainly when there is volume growth in the marketplace, market dynamics change. Generally speaking, I think competition is less likely to go out aggressively for competitive waste streams when they are getting waste streams organically. So I think that's happening, I think that's just sort of normal supply and demand kind of activity that happens in a marketplace. We are using our tools, right? So capture is rolled out to all of our areas across the country. That gives us – it makes us more efficient in talking to customers and calling on new accounts, it makes the selling process better and more desirable and enjoyable for our customers, and it gives us better pricing control at that point of decision. So that's happening, that's helping affect churn. And then PBS, tied to that training, we're also have refined our sales compensation plans, et cetera. So there's a lot of work inside the company that's doing that. Again, a normal growth environment organically would be a better market to get price in. And then obviously on the municipal side of the business, we talked about moving a portion of that business to the better index, and so every quarter now we've reported an increase in moving more customers to the new index that's more in line with our cost structure. We are going to continue that hard work, and over time we will move the needle consistently and basically kind of re-imagine how we price municipal customers, because we have to have an index that's fair. So it's a mouthful, but all those things working together for the greater good here.

[Scott J. Levine:]

Yeah, that's helpful. Thank you. And as my follow up, I guess here, so, with the dividend hike I have that equating to about, I don't know, 55% to 60% of your free cash flow target for this year. I know you are buying back stock so that share base comes down, but you know that, coupled with the fact that you guys are spending little bit more on acquisitions last year and on pace to do so again this year, is there any thought we should have in terms of what kind of guides the thought process on the dividend, which I know is a board decision, but are you guys comfortable? I don't know where the leverage sits today, but maybe just a little bit more color around that?

[Charles F. Serianni:]

You know, we are certainly comfortable with the leverage where it's at today. And you know, keep in mind also that we are going to be growing the EBITDA of the company. When we think about dividend growth, we think about growing dividends in line with our growth in free cash flow, so that's something that's very, very comfortable for us. You know, a 7% growth in the dividend this quarter is right in line with our five-year CAGR, and it's obviously something that we are all very comfortable with, that the board's very comfortable with.

[Donald W. Slager:]

Scott, we expect the leverage to continue to drop through the course of the year to sub-three. We anniversary some events, the business continues to perform and grow as Chuck said, so we are very comfortable with the leverage. And we do a very in-depth discussion with our board every year on our financial policies and cash allocation. We had a very big discussion with our board this week on the dividend. We always had that kind of holistic view of cash for acquisitions, cash for dividend and for buyback. And so we'll continue to do that, and we think this is right sort of balanced approach to efficiently return cash to shareholders. And the question was do we have confidence; we wouldn't have done if we didn't have confidence in it.

[Scott J. Levine:]

Understood. Thank you.

[Operator:]

Our next question will come from Michael Hoffman with Stifel. Your line is now open.

[Michael E. Hoffman:]

Thank you very much for taking my questions Don, Chuck and Brian.

[Donald W. Slager:]

Hi, Michael.

[Michael E. Hoffman:]

Hi guys. On the operating leverage of the business, when I think about Chuck's comment that there was 60 basis points of leverage on solid waste but it's offset by 60 basis points from recycling E&P, how do I think about that tracking into the second half? Is the 60 on the E&P and recycling kind of going to be a constant, but the solid waste should have some acceleration, maybe running towards 100 basis points?

[Charles F. Serianni:]

I think it's going to be relatively consistent, Michael, over the course of the remainder of the year. I don't see the headwind – we are not forecasting the headwind in recycling to go away anytime soon, and we're certainly not calling for an upturn in oil rigs. We don't see that anytime real soon. So I think that that headwind's going to consist – stay consistent. I would also say that we feel very comfortable with the increase in solid waste, and we think that we're going to continue to benefit from the initiatives that Don had talked about, as well as our continued focus in on driving up our yield.

[Donald W. Slager:]

Yeah, so Michael I'll add to that. I look at that as upside, right? Because the underlying business, the majority of our business, our solid waste business, is performing very well, and we've got these two components, right? Recycling is 9% of our revenue, commodity sales is about half of that 9%, and then our E&P business is less than 2% of our overall business. So we've got these two sort of micro verticals here that you know are fairly volatile. But we are confident that they'll return; we're bringing more focus to the recycling space than we ever have. So as we get those businesses to come around and the broader macro environment improves, that's just sort of added fuel to an already very well operating and performing core business.

[Michael E. Hoffman:]

Okay, so just so I make sure I understood it – this isn't my second question, operator...

[Donald W. Slager:]

Oh, I think it is, Michael.

[Michael E. Hoffman:]

Then, well just so I – so the 60 stays 60 as the headwind, 3Q, 4Q, but the 60 that was solid waste should improve – maybe it's 70, 80; 80 goes to 90, 100, 3Q, 4Q, that's the way to think about it based on what you all have just said?

[Donald W. Slager:]

Yeah, well if you think about it, one of the big points of – that when Chuck mentioned the headwind from E&P integration, some of the integration cost is going to taper down, right? And then obviously as you know, you've followed this business a long time, there's a lot of moving parts in mix, geographical, business mix, some of the cycles of pricing, and as we said, we expect pricing to be more like 2% for the full year now. But yeah, I mean it's – we think the underlying performance of the business improves from here. And we've got to continue to do same things we've been doing. We've got to continue to have success in moving to the new index in the municipal business, and it's going to depend a little bit on the macro environment, a little bit on the market dynamic.

[Michael E. Hoffman:]

Okay. And then on the underlying volume trend, should we see a year-over-year improvement in the second half relative to the first half, as the drivers of this continue to improve? Residential construction, non-residential construction, it turns into more volume in the cans, the whole bit?

[Charles F. Serianni:]

Yeah, I think based, Michael, on where we are right now and what we see in the future, you know we feel comfortable with the volume for the year up about 1.5%.

[Michael E. Hoffman:]

Okay.

[Donald W. Slager:]

So to your point on more volume in the cans, we are seeing some pretty good trends in service increases, less decreases. We didn't talk about that in our comments, but that's all continues to trend very well. But again, as you know, we've all thought this thing was going to recover quicker than it did, and so I want to temper you know everyone's excitement. I mean we feel really good about the business, we are very proud of the team, but let's see how things, let's see how the market and the macro issue sort of comes around in Q3.

[Michael E. Hoffman:]

Perfect. Well, nice job in the quarter. Thank you for everything.

[Donald W. Slager:]

Thanks Michael.

[Charles F. Serianni:]

Thanks, Mike.

[Operator:]

The next question will come from Joe Box with KeyBanc Capital Markets. Your line is open.

[Joe G. Box:]

Hey, guys.

[Charles F. Serianni:]

Hey, Joe.

[Donald W. Slager:]

Hi, Joe.

[Joe G. Box:]

Don, could you just put some figures, or maybe at least some color, around the reduction in rollbacks and churn that you alluded to earlier?

[Donald W. Slager:]

Yeah, we can do that. You want to give him some stats, Brian?

[Brian M. DelGhiaccio:]

Joe, if you kind of take a look at each of those components right, so we talk about, call it gross price, what we're going out to the market with to our customers, as well as the impact of rollback, and then obviously that impacted churn. And if you kind of take a look at the sequential improvement in yield from 2.1% to 2.4%, each of those components had a relatively equal contribution. So think of it like 10 basis points each getting better sequentially from each of those three components, that is basically the way that you compute average yield.

[Joe G. Box:]

Okay, understood. Yeah, interesting that you guys are actually capturing a greater percentage of that, whereas it looks like one of your competitors is capturing less, which might be a mix issue. But maybe switching gears for my follow-up, Don, I get the $0.01 hit from commodity prices sold. I'm just curious how you view that. Is it theoretically possible that – or is it positive that your third-party MRF vendors are actually doing away with rebates now? Does it suggest that maybe there's some momentum in the industry to pushing back on recycling, and theoretically this business can be structurally improved?

[Donald W. Slager:]

Yeah, it's theoretical, yes, right. So I'll tell you what's happened historically, when we've seen down cycles in recycling is just about the time the market starts to sort of revolt and raise prices and maybe constrain some service, the volume – or the commodity prices bounce back, and then the market doesn't really change very much. So the fact that this has been so steep, and I would say sustained, probably we've had great luck with moving prices forward in the open market, which says frankly, customers are willing to pay almost as much for recycling as waste. And then we've done a lot of customer insight work in our marketing group here, and customers are telling us that, it's important. If it's really important to them, they're willing to pay for it. So customer demand should accompany willingness to pay, and that's our view. Now in the – the open market's one thing, because the contractual obligations that we have with customers are different and shorter term. A lot of our recycling is done with municipalities; those are longer-term contracts, as I said in my comments. Those will take longer to turn, but I'll guarantee you this, our team here, our recycling group, our operating group, our sales team, our pricing team, all working very diligently together to think about how we are going to, as I said re-imagine the recycling business here of the future, and our view is that it's not going to be the same way it occurs today, it just can't be. And so, the overarching point there is, if we want recycling to really truly be sustainable, sustainability can't happen without consistent profitability. It's just impossible. And so we've got to find a new way to make the model truly sustainable, therefore sustainably or consistently profitable. That's again a mouthful, but it's what we're working on. We're still committed to it, because our customers want it, and as I said, if they really demand it then that should be accompanied with willingness to pay.

[Joe G. Box:]

Appreciate it, thank you.

[Donald W. Slager:]

Thanks.

[Operator:]

Our next question comes from Ken Layne (34

[Unknown Speaker:]

Hey, guys thanks for taking my question.

[Donald W. Slager:]

Sure

[Charles F. Serianni:]

Hey Ken (34

[Unknown Speaker:]

Let's see, just a little bit more on the pricing side again. It looks this was the second quarter where average yield came in above 2%. I just want to see if you have any view or expectations for the remainder of the year?

[Donald W. Slager:]

Yeah, we are not going to give you quarterly expectations, because I've said I think pricing will look more like 2%, the original guidance we gave you was 1.5%. So all these things coming together, again the tools being deployed, you know, the benefit of organic growth, all the things I mentioned earlier, yeah, we think we'll continue to see that kind of pricing for the reminder of the year. You know, we do have a couple of things on the forefront here, the comp gets a little bit tougher in the second half for the year, we have some one time pricing actions that we took in the second half of last year that don't happen again in 2015, but all-in we think pricing will be a pretty good story for us from here out through the end.

[Unknown Speaker:]

Sure, thanks. That's helpful. And then I guess switching gears a little bit, more on the recycling side, are you expecting sort of any improvement in the back half of the year, just given some of the recent stabilization in the commodity pricing environment?

[Donald W. Slager:]

No, the guidance we've given you assumes that recycling stays flat, commodity sales just stay flat from here for the remainder of the year. If it takes a bounce, that will be a little bit of upside for us.

[Unknown Speaker:]

Sure, sure, okay. Great. Well, thanks guys, and good job.

[Donald W. Slager:]

Thank you.

[Charles F. Serianni:]

Thank you.

[Operator:]

Our next question will come from Alex Ovshey with Goldman Sachs. Your line is open.

[Alex Ovshey:]

Thank you. How are you guys?

[Donald W. Slager:]

Good Alex, how are you today.

[Alex Ovshey:]

Good, Don, thanks. On the cost side, so just looking at the details that you provide, so buckets like labor and related benefits, maintenance and repair, SG&A, I think of those as relatively fixed, and so buckets where you should have leverage on when volumes start to really pick up. And just looking at the year-over-year change on those costs, it sounds like they are up almost in that high single-digit range. So just on those buckets, can you just talk about why we are seeing that kind of inflation there? May be zoning in on the repair side, where you have one fleet happening, I mean I would think at some point those costs are to start to level out for you?

[Charles F. Serianni:]

Yeah, you know, so Alex, you've got to keep in mind also what I said during my comments, that you've got a 250 basis point reduction in revenue, and that reduction in revenue is driving an increase in those costs, in terms of a percentage of revenue. So if you – some of the lines items that you called out are some of the larger cost categories. So in terms of labor, that's about 40 basis points of the overall increase. It's about 20 basis points on the maintenance side, and just for reference it's 20 basis points on the SG&A also. So you got to take that into consideration when you're looking at the basis point increase year-over-year. The other thing that we need to take into consideration is the mix of business year-over-year. As we've mentioned, the volume increases that we got have really been focused in on the industrial business and on the residential business, and there's not as much – our ability to leverage those costs isn't quite as great as some of the other cost categories.

[Donald W. Slager:]

So remember too, we've got acquisitions year-over-year, we've got volume growth, and as it relates to maintenance specifically, we pointed out a couple of times before, while we're very pleased with our One Fleet initiative, and it's exactly the right thing to do, when we started that program we did not see some of the fleet complexity coming our way. So we do have some cost increases coming from the new cleaner engines and some of that. So – and I'll just remind everybody, we didn't talk about it here on the call, but one of the paybacks on One Fleet is the – aging the fleet in a methodical fashion and getting that CapEx savings that we've talked about a number times; one-time $200 million savings, plus the ongoing benefit of running a fleet that's about a year older, which is about $15 million a year in CapEx. So maintenance specifically is – we're getting a great payback on that.

[Charles F. Serianni:]

One finer point also I think on the labor side to keep in mind, is that we did call out some integration costs this year, and that's obviously included in the labor numbers.

[Brian M. DelGhiaccio:]

Yeah, and Alex just to put some numbers around the acquisition and volume growth that Don was talking about, our acquisition revenue is up 2.7% year-over-year, and volume's up 1.1%. So when you add those types of revenue, it's going to come along with it, costs, and so when you're just looking at cost change expressed as a percentage year-over-year, you've got to include those revenues as well.

[Alex Ovshey:]

Yeah, okay, I appreciate everybody's thoughts there. And then in the filing, the 8-K, you do break out an E&P waste services revenue number; I think it's $27 million for the quarter? So is that essentially the Tervita revenue that you're reporting?

[Charles F. Serianni:]

Yes, that's Tervita; that's primarily the Tervita revenue.

[Alex Ovshey:]

Okay, great. Thank you.

[Operator:]

Our next question comes from Al Kaschalk with Wedbush Securities. Your line is now open.

[Al Kaschalk:]

Good afternoon, guys.

[Brian M. DelGhiaccio:]

Hello, Al.

[Al Kaschalk:]

Hope you're all doing well. I want to focus on core price for a minute, and I joined a little late so I apologize if – I know you had 3.8% for the quarter; I am not sure what it was in the first quarter. But my question is driven at the open market piece, and in particular if the volume trends are favorable, why we should not expect that number, that contribution of open market pricing, to be better going forward? Or is that the real reason why guidance is being lifted?

[Charles F. Serianni:]

Yeah, I think what we're saying is that we are lifting guidance because of the favorability that we're seeing right now in our solid waste business. You know, what I called out before is a 60 basis point increase in margin year-over-year due to the solid waste business. Keep in mind also that if you kind of look at our increasing guidance overall, a good portion of that increase is really due to the solid waste business, and – which is primarily yield.

[Donald W. Slager:]

Yeah, and it's being offset by a couple of things; we called out the commodities. We called out some of the headwind from E&P. But you are right, the core business is operating very well, and as we turn around these two very small parts of our business, although obviously volatile parts of our business, that will all come in behind it, so...

[Al Kaschalk:]

Great.

[Donald W. Slager:]

You're on the right track. The business is doing very well, Al.

[Al Kaschalk:]

No, I hear you. And I guess the question that – the follow-on to that would be at some point we'll start to see that in terms of the EBITDA margin. I know there's number of moving parts and we need that restricted portion to get north to 2% to give you some help?

[Donald W. Slager:]

Well, another way of saying it, right, is if recycling hadn't cratered on us, and E&P hadn't dried up, right, our margins would have been up 60 basis points. So that's it.

[Al Kaschalk:]

Just a follow up I guess; one of your competitors articulated, probably for the first time, their affection for another price index as well, and I know you've talked about it's a slow process, but can you give any more insights in terms of how that's going? I know it's a process, but in terms of the realization of the new index on the customers?

[Donald W. Slager:]

Right, so we've said that approximately, what, $2.4 billion of our business is that, again, that 30%, right. So it is restricted to some type of index. What we've been talking about lately is about $800 million of that piece is the smaller municipal contract, generally residential only, call it a five-year contract. So that $800 million, that's the first piece we've been working on to move to a new index. We've now moved $150 million of that business, $150 million of the $800 million, to a new index, that's confirmed. Still working on the balance. And as you would expect, logically, when we try to change how this occurs with our customers and within the market, we will start with smaller contracts, and having good success. The remaining $1.7 billion is larger contracts and franchise agreements that tend to run a lot longer than five years, and also include oftentimes commercial, small container, large container business. So, we're up to $150 million out of the targeted $800 million. We're progressing every quarter. We don't know how far it will go, we're certainly making strong arguments and frankly successful arguments for it, and we'll continue to do it. Again, the overarching issue here is, in these kind of public-private partnerships they've got to be mutually beneficial; it's unrealistic for our municipal partners to expect us to settle for an index that doesn't adequately cover our inflation. So we've got to cover our inflation net of productivity on a consistent basis. That's reasonable, it's fair, and that's one of the reasons we're getting it done. The fact that there is this water-sewer-trash index, something we can point to that's been in use now for what 15 years or whatever, is helping. And so, it's too early to tell how long it's going to take and how far it's going to go. I can tell this, we're not going to stop pushing. And that's – we'll update you every quarter as we go through time, but that's certainly helping and will certainly show some benefit into next year.

[Al Kaschalk:]

Just in terms of the customer feedback, maybe you don't want to share, but I guess if it's helpful for them on their side of the equation, there would seem to be reasons that the acceptance rate would be high going forward?

[Donald W. Slager:]

Yeah, so it's fair, it's equitable and in some cases it's helpful for them, especially those municipalities that have their own sewer and water infrastructure that has been struggling to keep up with the pace of inflation. Frankly, we weren't the only ones that didn't know that this sewer, water – water-sewer-trash index existed, so we're shedding a lot of light on that. And so again, progress continues and we're hopeful and confident that we'll have another positive update for you as we go through the year.

[Al Kaschalk:]

Thank you.

[Operator:]

That will conclude the question and answer session. I will turn the conference back to Don for closing remarks.

[Donald W. Slager:]

Well thank you, Gabrielle. I would like to thank all Republic employees for their hard work, their commitment, and most of all dedication to operational excellence and creating the Republic way. Thank you for spending time with us today, everyone. Have a good evening.

[Operator:]

Ladies and gentlemen, this concludes the Republic Services conference call for today. Thank you for participating. You may now disconnect.