Fitch Ratings Affirms Republic Services; Rating Outlook Stable.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the ratings on Republic Services' (NYSE NYSE See: New York Stock Exchange :RSG RSG Revenue Support Grant (UK) RSG Recovery Storage Group (Microsoft Exchange) RSG Ready, Set, Go! RSG Regional Support Group RSG Research Study Group (NATO) ) senior unsecured bank debt, senior unsecured notes, and issuer default rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'BBB+'. At the same time, Fitch has revised the Rating Outlook to Stable from Positive. The ratings affect approximately $1.4 billion of debt. The revised Outlook reflects Fitch's diminished expectations for a decline in RSG's financial leverage due to margin trends and capital expenditures. Increased fuel costs have impeded margin improvement, and RSG is allocating a substantial amount of its excess cash flow toward landfill expansion projects and share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . As a result, while Fitch expects RSG's operations and free cash flow to remain solid, a Stable Outlook incorporates the likelihood that debt and leverage will be relatively steady during the foreseeable future. The ratings continue to be supported by RSG's strong operating performance, strong credit measures, stable free cash flow, and high degree of financial flexibility. The ratings also incorporate the low volatility of the solid waste industry. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become margins fell during the third quarter, largely due to higher fuel costs. Overall margins in 2005 are expected to be flat or improved slightly from one year ago, and in 2006, stronger pricing could help improve margins further, but a continued rise in energy costs could offset such improvement. Currently, about two-thirds of RSG's overall fuel exposure is being hedged through a combination of heating oil hedges, fuel purchasing agreements, and fuel surcharges. Capital expenditures in 2005 are expected to be in the $330 million range, up from $284 million in 2004. The increase is due to landfill expansion projects and new franchise municipal collection agreements. In 2005, RSG secured five landfill expansion permits, as part of its vertical integration strategy. Going forward, Fitch expects the company's capex to remain at about 10% of its revenues. Weaker-than-expected margins and increased capex have pressured free cash flow in 2005. The company had debt of $1,369 million at Sept. 30, 2005, up slightly from $1,354 million at Dec. 31, 2004. The company spent $451 million on share repurchases during the first nine months of 2005, and total repurchases in 2005 are expected to be about $470 million-$480 million. The remaining authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: share repurchase amount in 2006 is about $215 million. If the company continues to produce solid free cash flow, the company may consider establishing a new share repurchase authorization during 2006. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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