filings.toolsItem 1. FINANCIAL STATEMENTS.
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Item 1. FINANCIAL STATEMENTS.
REPUBLIC SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
| June 30, | December 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 490.6 | $ | 140.0 | |||||||
| Accounts receivable, less allowance for doubtful accounts and other of $82.9 and $83.2, respectively | 1,817.8 | 1,768.4 | |||||||||
| Prepaid expenses and other current assets | 351.3 | 472.6 | |||||||||
| Total current assets | 2,659.7 | 2,381.0 | |||||||||
| Restricted cash and marketable securities | 178.0 | 163.6 | |||||||||
| Property and equipment, net | 11,446.5 | 11,350.9 | |||||||||
| Goodwill | 15,864.9 | 15,834.5 | |||||||||
| Other intangible assets, net | 463.4 | 496.2 | |||||||||
| Other assets | 1,321.6 | 1,183.9 | |||||||||
| Total assets | $ | 31,934.1 | $ | 31,410.1 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 1,285.5 | $ | 1,411.5 | |||||||
| Notes payable and current maturities of long-term debt | 1,432.9 | 932.3 | |||||||||
| Deferred revenue | 472.5 | 467.3 | |||||||||
| Accrued landfill and environmental costs, current portion | 140.5 | 141.6 | |||||||||
| Accrued interest | 103.1 | 104.1 | |||||||||
| Other accrued liabilities | 1,099.1 | 1,171.5 | |||||||||
| Total current liabilities | 4,533.6 | 4,228.3 | |||||||||
| Long-term debt, net of current maturities | 11,526.8 | 11,887.1 | |||||||||
| Accrued landfill and environmental costs, net of current portion | 2,332.2 | 2,281.0 | |||||||||
| Deferred income taxes and other long-term tax liabilities, net | 1,569.2 | 1,526.8 | |||||||||
| Insurance reserves, net of current portion | 365.8 | 348.8 | |||||||||
| Other long-term liabilities | 600.2 | 594.6 | |||||||||
| 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; 321.2 and 320.7 issued including shares held in treasury, respectively | 3.2 | 3.2 | |||||||||
| Additional paid-in capital | 2,932.2 | 2,900.8 | |||||||||
| Retained earnings | 9,060.7 | 8,433.9 | |||||||||
| Treasury stock, at cost; 7.2 and 6.1 shares, respectively | (981.9) | (783.5) | |||||||||
| Accumulated other comprehensive loss, net of tax | (9.1) | (12.1) | |||||||||
| Total Republic Services, Inc. stockholders’ equity | 11,005.1 | 10,542.3 | |||||||||
| Non-controlling interests in consolidated subsidiary | 1.2 | 1.2 | |||||||||
| Total stockholders’ equity | 11,006.3 | 10,543.5 | |||||||||
| Total liabilities and stockholders’ equity | $ | 31,934.1 | $ | 31,410.1 |
The accompanying notes are an integral part of these statements.
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | $ | 4,048.0 | $ | 3,725.9 | $ | 7,909.8 | $ | 7,307.0 | |||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Cost of operations | 2,382.6 | 2,224.4 | 4,665.8 | 4,393.8 | |||||||||||||||||||
| Depreciation, amortization and depletion | 413.0 | 358.3 | 812.2 | 717.0 | |||||||||||||||||||
| Accretion | 26.7 | 24.5 | 53.4 | 48.6 | |||||||||||||||||||
| Selling, general and administrative | 407.6 | 396.0 | 821.7 | 775.2 | |||||||||||||||||||
| Gain on business divestitures and impairments, net | (1.4) | — | (1.4) | — | |||||||||||||||||||
| Restructuring charges | 5.7 | 15.5 | 11.5 | 21.0 | |||||||||||||||||||
| Operating income | 813.8 | 707.2 | 1,546.6 | 1,351.4 | |||||||||||||||||||
| Interest expense | (128.3) | (124.4) | (267.6) | (251.1) | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | (0.2) | |||||||||||||||||||
| Loss from unconsolidated equity method investments | (33.8) | (3.6) | (42.5) | (2.7) | |||||||||||||||||||
| Interest income | 1.6 | 1.6 | 3.1 | 3.0 | |||||||||||||||||||
| Other income (loss), net | 0.7 | (0.6) | 13.3 | 1.9 | |||||||||||||||||||
| Income before income taxes | 654.0 | 580.2 | 1,252.9 | 1,102.3 | |||||||||||||||||||
| Provision for income taxes | 142.1 | 152.6 | 287.3 | 290.9 | |||||||||||||||||||
| Net income | 511.9 | 427.6 | 965.6 | 811.4 | |||||||||||||||||||
| Net income attributable to non-controlling interests in consolidated subsidiary | (0.4) | (0.2) | (0.3) | (0.2) | |||||||||||||||||||
| Net income attributable to Republic Services, Inc. | $ | 511.5 | $ | 427.4 | $ | 965.3 | $ | 811.2 | |||||||||||||||
| Basic earnings per share attributable to Republic Services, Inc. stockholders: | |||||||||||||||||||||||
| Basic earnings per share | $ | 1.62 | $ | 1.35 | $ | 3.06 | $ | 2.56 | |||||||||||||||
| Weighted average common shares outstanding | 314.9 | 316.8 | 315.1 | 316.8 | |||||||||||||||||||
| Diluted earnings per share attributable to Republic Services, Inc. stockholders: | |||||||||||||||||||||||
| Diluted earnings per share | $ | 1.62 | $ | 1.35 | $ | 3.06 | $ | 2.56 | |||||||||||||||
| Weighted average common and common equivalent shares outstanding | 315.2 | 317.3 | 315.5 | 317.2 | |||||||||||||||||||
| Cash dividends per common share | $ | 0.535 | $ | 0.495 | $ | 1.070 | $ | 0.990 |
The accompanying notes are an integral part of these statements.
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net income | $ | 511.9 | $ | 427.6 | $ | 965.6 | $ | 811.4 | |||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Hedging activity: | |||||||||||||||||||||||
| Realized income reclassified into earnings | (6.8) | (2.2) | (8.9) | (4.8) | |||||||||||||||||||
| Unrealized gain | 1.2 | 7.3 | 6.4 | 12.5 | |||||||||||||||||||
| Pension activity: | |||||||||||||||||||||||
| Change in funded status of pension plan obligations | — | — | — | 0.2 | |||||||||||||||||||
| Foreign currency activity: | |||||||||||||||||||||||
| Unrealized gain on foreign currency translation | 1.8 | (2.5) | 5.5 | (2.5) | |||||||||||||||||||
| Other comprehensive income, net of tax | (3.8) | 2.6 | 3.0 | 5.4 | |||||||||||||||||||
| Comprehensive income | 508.1 | 430.2 | 968.6 | 816.8 | |||||||||||||||||||
| Comprehensive income attributable to non-controlling interests | (0.4) | (0.2) | (0.3) | (0.2) | |||||||||||||||||||
| Comprehensive income attributable to Republic Services, Inc. | $ | 507.7 | $ | 430.0 | $ | 968.3 | $ | 816.6 | |||||||||||||||
The accompanying notes are an integral part of these statements.
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
| Republic Services, Inc. Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss, Net of Tax | Non-controlling Interests In Consolidated Subsidiary | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | 320.7 | $ | 3.2 | $ | 2,900.8 | $ | 8,433.9 | (6.1) | $ | (783.5) | $ | (12.1) | $ | 1.2 | $ | 10,543.5 | |||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | 453.8 | — | — | — | (0.1) | 453.7 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | 6.8 | — | 6.8 | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | (168.5) | — | — | — | — | (168.5) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuances of common stock | 0.5 | — | 3.2 | — | (0.2) | (28.5) | — | — | (25.3) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 12.0 | (1.3) | — | — | — | — | 10.7 | ||||||||||||||||||||||||||||||||||||||||||||
| Distributions paid | — | — | — | — | — | — | — | (0.3) | (0.3) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | 321.2 | 3.2 | 2,916.0 | 8,717.9 | (6.3) | (812.0) | (5.3) | 0.8 | 10,820.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 511.5 | — | — | — | 0.4 | 511.9 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | — | (3.8) | — | (3.8) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | (168.0) | — | — | — | — | (168.0) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuances of common stock | — | — | 5.0 | — | — | (0.7) | — | — | 4.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 11.2 | (0.7) | — | — | — | — | 10.5 | ||||||||||||||||||||||||||||||||||||||||||||
| Purchase of common stock for treasury | — | — | — | — | (0.9) | (169.2) | — | — | (169.2) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | 321.2 | $ | 3.2 | $ | 2,932.2 | $ | 9,060.7 | (7.2) | $ | (981.9) | $ | (9.1) | $ | 1.2 | $ | 11,006.3 | |||||||||||||||||||||||||||||||||||||
| Republic Services, Inc. Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss, Net of Tax | Non-controlling Interests In Consolidated Subsidiary | ||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Total | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | 320.3 | $ | 3.2 | $ | 2,843.2 | $ | 7,356.3 | (4.2) | $ | (504.6) | $ | (12.1) | $ | 0.8 | $ | 9,686.8 | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 383.9 | — | — | — | — | 383.9 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | 2.8 | — | 2.8 | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | (156.5) | — | — | — | — | (156.5) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuances of common stock | 0.3 | — | 2.9 | — | (0.1) | (13.9) | — | — | (11.0) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 12.3 | (1.0) | — | — | — | — | 11.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | 320.6 | 3.2 | 2,858.4 | 7,582.7 | (4.3) | (518.5) | (9.3) | 0.8 | 9,917.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | 427.4 | — | — | — | 0.2 | 427.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | 2.6 | — | 2.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | (156.6) | — | — | — | — | (156.6) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuances of common stock | 0.1 | — | 4.5 | — | — | (0.5) | — | — | 4.0 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | 10.6 | (0.8) | — | — | — | — | 9.8 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | 320.7 | $ | 3.2 | $ | 2,873.5 | $ | 7,852.7 | (4.3) | $ | (519.0) | $ | (6.7) | $ | 1.0 | $ | 10,204.7 | |||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these statements.
REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash provided by operating activities: | |||||||||||
| Net income | $ | 965.6 | $ | 811.4 | |||||||
| Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
| Depreciation, amortization, depletion and accretion | 865.6 | 765.6 | |||||||||
| Non-cash interest expense | 34.9 | 45.1 | |||||||||
| Stock-based compensation | 21.8 | 21.4 | |||||||||
| Deferred tax provision | 47.5 | 33.4 | |||||||||
| Provision for doubtful accounts, net of adjustments | 19.9 | 19.7 | |||||||||
| Loss on extinguishment of debt | — | 0.2 | |||||||||
| Gain on disposition of assets and asset impairments, net | (0.3) | (4.7) | |||||||||
| Loss (gain) from unconsolidated equity method investments | 42.5 | 2.7 | |||||||||
| Other non-cash items | (0.4) | (1.5) | |||||||||
| Change in assets and liabilities, net of effects from business acquisitions and divestitures: | |||||||||||
| Accounts receivable | (69.4) | (52.0) | |||||||||
| Prepaid expenses and other assets | 36.2 | 138.5 | |||||||||
| Accounts payable | 19.5 | 35.1 | |||||||||
| Capping, closure and post-closure expenditures | (22.2) | (24.5) | |||||||||
| Remediation expenditures | (26.7) | (21.2) | |||||||||
| Other liabilities | (47.3) | (5.4) | |||||||||
| Proceeds for retirement of certain hedging relationships | 23.7 | 2.4 | |||||||||
| Cash provided by operating activities | 1,910.9 | 1,766.2 | |||||||||
| Cash used in investing activities: | |||||||||||
| Purchases of property and equipment | (917.9) | (714.3) | |||||||||
| Proceeds from sales of property and equipment | 5.3 | 17.1 | |||||||||
| Cash used in acquisitions and investments, net of cash and restricted cash acquired | (201.0) | (987.7) | |||||||||
| Cash paid for business divestitures | 1.7 | (0.3) | |||||||||
| Purchases of restricted marketable securities | (17.0) | (9.7) | |||||||||
| Sales of restricted marketable securities | 16.4 | 9.1 | |||||||||
| Other | (0.2) | 11.5 | |||||||||
| Cash used in investing activities | (1,112.7) | (1,674.3) | |||||||||
| Cash used in financing activities: | |||||||||||
| Proceeds from credit facilities and notes payable, net of fees | 10,484.2 | 15,401.2 | |||||||||
| Proceeds from issuance of senior notes, net of discount and fees | 888.9 | 1,183.6 | |||||||||
| Payments of credit facilities and notes payable | (11,274.0) | (16,286.9) | |||||||||
| Issuances of common stock, net | (21.0) | (7.0) | |||||||||
| Purchases of common stock for treasury | (167.6) | — | |||||||||
| Cash dividends paid | (336.8) | (313.0) | |||||||||
| Distributions paid to non-controlling interests in consolidated subsidiary | (0.3) | — | |||||||||
| Contingent consideration payments | (8.0) | (11.6) | |||||||||
| Cash used in financing activities | (434.6) | (33.7) | |||||||||
| Effect of foreign exchange rate changes on cash | 0.7 | 0.5 | |||||||||
| Increase in cash, cash equivalents, restricted cash and restricted cash equivalents | 364.3 | 58.7 | |||||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period | 227.5 | 214.3 | |||||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | 591.8 | $ | 273.0 |
The accompanying notes are an integral part of these statements.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Republic Services, Inc., a Delaware corporation, and its consolidated subsidiaries (also referred to collectively as Republic, the Company, we, us, or our), is one of the largest providers of environmental services in the United States, as measured by revenue. Our senior management evaluates, oversees and manages the financial performance of our operations through three field groups, referred to as Group 1, Group 2 and Group 3. Group 1 is our recycling and waste business operating primarily in geographic areas located in the western United States. Group 2 is our recycling and waste business operating primarily in geographic areas located in the southeastern and mid-western United States, the eastern seaboard of the United States, and Canada. Group 3 is our environmental solutions business operating primarily in geographic areas located across the United States and Canada. These groups represent our reportable segments, which each provide integrated environmental services, including but not limited to collection, transfer, recycling, and disposal.
The unaudited consolidated financial statements include the accounts of Republic Services, Inc. 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 the equity method of accounting or, for investments that do not meet the criteria to be accounted for under the equity method, we reflect these investments at their fair value when it is readily determinable. If fair value is not readily determinable, we use an alternative measurement approach. 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 have 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 fiscal year ended December 31, 2023.
For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation and are not material to our consolidated financial statements. All dollar amounts in 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 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 landfill development costs and final capping, closure and post-closure costs; our liabilities for environmental remediation, and insurance reserves. For more detail on significant accounting policies, refer to Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Our actual results may differ significantly from our estimates.
New Accounting Pronouncements
Accounting Standards Updates Issued but not yet Adopted
Climate-Related Disclosures
In March 2024, the SEC adopted Final Rule 33-11275 and 34-99678 - The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rules require registrants to provide standardized disclosures related to material climate-related risks, governance and risk management strategies, and the financial impact of severe weather events and material Scope 1 and 2 greenhouse gas emissions. The rules require implementation in phases between 2025 and 2033. In April 2024, the SEC announced that it would voluntarily stay these rules pending judicial review. The Company is currently evaluating the impact of the rules on its future consolidated financial statements.
Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative
In October 2023, the FASB issued ASU 2023-06 to modify the disclosure or presentation requirements of a variety of topics,
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
which will allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the SEC's requirements, and to align the requirements in the FASB accounting standard codification with the SEC's regulations. The Company is currently evaluating the amendments and the impact on its future consolidated financial statements.
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). ASU 2023-07 amends the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. We are currently assessing the effect this guidance may have on our consolidated financial statements.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 requires entities to provide additional information in the rate reconciliation and additional disclosures about income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. We are currently assessing the effect this guidance may have on our consolidated financial statements.
2. BUSINESS ACQUISITIONS, INVESTMENTS AND RESTRUCTURING CHARGES
Acquisitions
We acquired various environmental services businesses during the six months ended June 30, 2024 and 2023. The aggregate purchase price paid for these business acquisitions and the allocations of the aggregate purchase price follows:
| 2024 | 2023 | |||||||||||||||||||||||||||||||
| Purchase price: | ||||||||||||||||||||||||||||||||
| Cash used in acquisitions, net of cash acquired of $0.8 and $15.0, respectively | $ | 40.9 | $ | 918.7 | ||||||||||||||||||||||||||||
| Holdbacks | — | 8.1 | ||||||||||||||||||||||||||||||
| Fair value, future minimum finance lease payments | — | 0.5 | ||||||||||||||||||||||||||||||
| Total | $ | 40.9 | $ | 927.3 | ||||||||||||||||||||||||||||
| Allocated as follows: | ||||||||||||||||||||||||||||||||
| Accounts receivable | $ | 1.9 | $ | 26.1 | ||||||||||||||||||||||||||||
| Prepaid expenses | — | 1.0 | ||||||||||||||||||||||||||||||
| Landfill development costs | — | 0.5 | ||||||||||||||||||||||||||||||
| Property and equipment | 20.3 | 160.3 | ||||||||||||||||||||||||||||||
| Operating right-of-use lease assets | — | 1.7 | ||||||||||||||||||||||||||||||
| Other assets | — | 0.1 | ||||||||||||||||||||||||||||||
| Parts and supplies | 0.1 | 2.2 | ||||||||||||||||||||||||||||||
| Accounts payable | (0.3) | (5.3) | ||||||||||||||||||||||||||||||
| Deferred revenue | — | (8.1) | ||||||||||||||||||||||||||||||
| Environmental remediation liabilities | — | (5.6) | ||||||||||||||||||||||||||||||
| Closure and post-closure liabilities | — | (10.5) | ||||||||||||||||||||||||||||||
| Operating right-of-use lease liabilities | — | (1.7) | ||||||||||||||||||||||||||||||
| Deferred income tax liabilities | (1.3) | (9.2) | ||||||||||||||||||||||||||||||
| Other liabilities | (0.2) | (1.2) | ||||||||||||||||||||||||||||||
| Fair value of tangible assets acquired and liabilities assumed | 20.5 | 150.3 | ||||||||||||||||||||||||||||||
| Excess purchase price to be allocated | $ | 20.4 | $ | 777.0 | ||||||||||||||||||||||||||||
| Excess purchase price allocated as follows: | ||||||||||||||||||||||||||||||||
| Other intangible assets | $ | 4.2 | $ | 103.0 | ||||||||||||||||||||||||||||
| Goodwill | 16.2 | 674.0 | ||||||||||||||||||||||||||||||
| Total allocated | $ | 20.4 | $ | 777.0 |
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Certain of the purchase price allocations are preliminary and based on information existing at the acquisition dates. Accordingly, the purchase price allocations are subject to change. For the acquisitions that closed during the six months ended June 30, 2024, we expect that a majority of the goodwill and intangible assets recognized as a result of these acquisitions will not be deductible for tax purposes.
These acquisitions are not material to the Company's results of operations, individually or in the aggregate. As a result, no pro forma financial information is provided.
In November 2023, we acquired all of the issued and outstanding capital stock or other ownership interests of Advanced Chemical Transport LLC (ACT). ACT's environmental solutions operations are primarily located in the western United States and provide us with additional growth opportunities in our environmental solutions line of business. The purchase price allocation is preliminary and remains subject to revision as additional information is obtained about the facts and circumstances that existed at the valuation date. The preliminary allocation of purchase price, including the value assigned to property, plant and equipment and customer relationship intangible assets acquired, is based on the best estimates of management and is subject to revision based on the final valuations. We expect our final valuations to be completed in the fourth quarter of 2024.
In December 2023, we acquired all of the issued and outstanding membership and other equity interests of Central Texas Refuse, LLC and an affiliate thereof (CTR). CTR's vertically integrated recycling and waste services operations are located in and around Austin, Texas and provide us with the opportunity to re-enter the high growth Austin market. The purchase price allocation is preliminary and remains subject to revision as additional information is obtained about the facts and circumstances that existed at the valuation date. The preliminary allocation of purchase price, including the value assigned to property, plant and equipment and customer relationship intangible assets acquired as well as certain landfill and environmental liabilities assumed, is based on the best estimates of management and is subject to revision based on the final valuations. We expect our final valuations to be completed in the fourth quarter of 2024.
Investments
In 2024, we acquired a non-controlling equity interest in a joint venture with a landfill gas-to-energy developer to construct a renewable natural gas project at one of our landfill locations in Illinois. During the six months ended June 30, 2024, we contributed $30.8 million in the joint venture. The investment is accounted for under the equity method of accounting.
In 2024, we acquired a non-controlling equity interest in a thermal processing facility that treats and recycles contaminated soil, hazardous and non-hazardous waste, and contaminated water to expand our environmental service offering in Canada. During the six months ended June 30, 2024, we contributed $26.9 million in the joint venture. The investment is accounted for under the equity method of accounting.
These investments were recorded as other assets in our consolidated balance sheets as of June 30, 2024.
In 2024 and 2023, we acquired non-controlling equity interests in certain limited liability companies that qualified for investment tax credits under Section 48 of the Internal Revenue Code. In exchange for our non-controlling interests, we made capital contributions of $90.8 million and $1.5 million, which were recorded to other assets in our June 30, 2024 and 2023 consolidated balance sheets, respectively. During the three and six months ended June 30, 2024, we decreased the carrying value of these investments by $33.2 million and $42.4 million, respectively. Additionally, our tax provisions reflect benefits of $32.6 million and $41.0 million for the three and six months ended June 30, 2024 due to the tax credits related to these investments, compared to no benefits for the three and six months ended June 30, 2023. For further discussion of the income tax benefits, refer to Note 11, Income Taxes, in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023.
Restructuring Charges
During the three and six months ended June 30, 2024, we incurred restructuring charges of $5.7 million and $11.5 million, respectively, and during the three and six months ended June 30, 2023, we incurred restructuring charges of $15.5 million and $21.0 million, respectively. The 2024 charges related to the redesign of our asset management, and customer and order management software systems. Of the 2023 charges, $9.4 million related to the early termination of certain leases and $6.1 million related to the redesign of our asset management, and customer and order management software systems. During the six months ended June 30, 2024 and 2023, we paid $9.9 million and $26.1 million, respectively, related to these restructuring efforts.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
A summary of the activity and balances in goodwill accounts by reporting segment follows:
| Balance as of December 31, 2023 | Acquisitions | Divestitures | Adjustments to Acquisitions and Other | Balance as of June 30, 2024 | ||||||||||||||||||||||||||||
| Group 1 | $ | 7,312.4 | $ | 1.1 | $ | — | $ | 16.7 | $ | 7,330.2 | ||||||||||||||||||||||
| Group 2 | 6,445.5 | — | (0.3) | (0.7) | 6,444.5 | |||||||||||||||||||||||||||
| Group 3 | 2,076.6 | 15.1 | — | (1.5) | 2,090.2 | |||||||||||||||||||||||||||
| Total | $ | 15,834.5 | $ | 16.2 | $ | (0.3) | $ | 14.5 | $ | 15,864.9 |
Adjustments to acquisitions during the six months ended June 30, 2024 primarily related to changes in our valuation of property, plant and equipment acquired as a result of obtaining new information regarding the acquisitions that closed in 2023.
Other Intangible Assets, Net
Other intangible assets, net, include values assigned to customer relationships, non-compete agreements and trade names, and are amortized over periods ranging from 1 to 15 years. A summary of the activity and balances by intangible asset type follows:
| Gross Intangible Assets | Accumulated Amortization | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | Acquisitions | Adjustments and Other | Balance as of June 30, 2024 | Balance as of December 31, 2023 | Additions Charged to Expense | Adjustments and Other | Balance as of June 30, 2024 | Other Intangible Assets, Net as of June 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Customer relationships | $ | 631.7 | $ | 3.3 | $ | (0.5) | $ | 634.5 | $ | (165.7) | $ | (31.5) | $ | — | $ | (197.2) | $ | 437.3 | ||||||||||||||||||||||||||||||||||||||
| Non-compete agreements | 30.4 | 0.9 | — | 31.3 | (15.7) | (3.1) | — | (18.8) | 12.5 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other intangible assets | 23.2 | — | — | 23.2 | (7.7) | (1.9) | — | (9.6) | 13.6 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 685.3 | $ | 4.2 | $ | (0.5) | $ | 689.0 | $ | (189.1) | $ | (36.5) | $ | — | $ | (225.6) | $ | 463.4 | ||||||||||||||||||||||||||||||||||||||
4. OTHER ASSETS
Prepaid Expenses and Other Current Assets
A summary of prepaid expenses and other current assets as of June 30, 2024 and December 31, 2023 follows:
| 2024 | 2023 | ||||||||||
| Parts and supplies | $ | 99.9 | $ | 97.3 | |||||||
| Prepaid expenses | 94.3 | 123.0 | |||||||||
| Other non-trade receivables | 56.2 | 63.2 | |||||||||
| Reinsurance receivable | 38.7 | 35.4 | |||||||||
| Income taxes receivable | 29.9 | 126.3 | |||||||||
| Prepaid fees for cloud-based hosting arrangements, current | 24.4 | 17.0 | |||||||||
| Derivative and hedging assets | — | 4.2 | |||||||||
| Other current assets | 7.9 | 6.2 | |||||||||
| Total | $ | 351.3 | $ | 472.6 |
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Other Assets
A summary of other assets as of June 30, 2024 and December 31, 2023 follows:
| 2024 | 2023 | ||||||||||
| Investments | $ | 586.0 | $ | 469.4 | |||||||
| Operating right-of-use lease assets | 231.2 | 238.1 | |||||||||
| Deferred compensation plan | 119.1 | 112.7 | |||||||||
| Prepaid fees and capitalized implementation costs for cloud-based hosting arrangements | 106.6 | 67.6 | |||||||||
| Reinsurance receivable | 94.7 | 92.1 | |||||||||
| Deferred contract costs and sales commissions | 81.3 | 82.5 | |||||||||
| Derivative and hedging assets | 59.3 | 74.1 | |||||||||
| Amounts recoverable for capping, closure and post-closure obligations | 23.1 | 21.9 | |||||||||
| Deferred financing costs | 2.9 | 3.6 | |||||||||
| Other | 17.4 | 21.9 | |||||||||
| Total | $ | 1,321.6 | $ | 1,183.9 |
5. OTHER LIABILITIES
Other Accrued Liabilities
A summary of other accrued liabilities as of June 30, 2024 and December 31, 2023 follows:
| 2024 | 2023 | ||||||||||
| Accrued payroll and benefits | $ | 280.7 | $ | 350.5 | |||||||
| Insurance reserves, current | 226.4 | 216.6 | |||||||||
| Accrued fees and taxes | 188.8 | 193.5 | |||||||||
| Accrued dividends | 168.0 | 168.3 | |||||||||
| Operating right-of-use lease liabilities, current | 53.2 | 54.8 | |||||||||
| Current tax liabilities | 41.8 | 2.1 | |||||||||
| Ceded insurance reserves, current | 38.7 | 35.4 | |||||||||
| Accrued professional fees and legal settlement reserves | 13.4 | 17.9 | |||||||||
| Derivative and hedging liabilities | 2.0 | 8.3 | |||||||||
| Other | 86.1 | 124.1 | |||||||||
| Total | $ | 1,099.1 | $ | 1,171.5 |
Other Long-Term Liabilities
A summary of other long-term liabilities as of June 30, 2024 and December 31, 2023 follows:
| 2024 | 2023 | ||||||||||
| Operating right-of-use lease liabilities | $ | 188.6 | $ | 194.9 | |||||||
| Deferred compensation plan liability | 121.2 | 114.7 | |||||||||
| Ceded insurance reserves | 94.7 | 92.1 | |||||||||
| Derivative and hedging liabilities | 77.9 | 71.3 | |||||||||
| Contingent purchase price and acquisition holdbacks | 59.4 | 59.1 | |||||||||
| Withdrawal liability - multiemployer pension funds | 19.3 | 19.6 | |||||||||
| Other | 39.1 | 42.9 | |||||||||
| Total | $ | 600.2 | $ | 594.6 |
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. LANDFILL AND ENVIRONMENTAL COSTS
As of June 30, 2024, we owned or operated 208 active landfills with total available disposal capacity estimated to be 5.1 billion in-place cubic yards. Additionally, we had post-closure responsibility for 126 closed landfills.
Accrued Landfill and Environmental Costs
A summary of accrued landfill and environmental liabilities as of June 30, 2024 and December 31, 2023 follows:
| 2024 | 2023 | ||||||||||
| Landfill final capping, closure and post-closure liabilities | $ | 2,004.9 | $ | 1,937.2 | |||||||
| Environmental remediation | 467.8 | 485.4 | |||||||||
| Total accrued landfill and environmental costs | 2,472.7 | 2,422.6 | |||||||||
| Less: current portion | (140.5) | (141.6) | |||||||||
| Long-term portion | $ | 2,332.2 | $ | 2,281.0 |
Final Capping, Closure and Post-Closure Costs
The following table summarizes the activity in our asset retirement obligation liabilities, which includes liabilities for final capping, closure and post-closure, for the six months ended June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| Asset retirement obligation liabilities, beginning of year | $ | 1,937.2 | $ | 1,786.4 | |||||||
| Non-cash additions | 29.6 | 30.7 | |||||||||
| Acquisitions, net of divestitures and other adjustments | 4.1 | 11.8 | |||||||||
| Asset retirement obligation adjustments | 2.8 | (9.7) | |||||||||
| Payments | (22.2) | (24.5) | |||||||||
| Accretion expense | 53.4 | 48.6 | |||||||||
| Asset retirement obligation liabilities, end of period | 2,004.9 | 1,843.3 | |||||||||
| Less: current portion | (74.3) | (76.6) | |||||||||
| Long-term portion | $ | 1,930.6 | $ | 1,766.7 |
We review annually, in the fourth quarter, and update as necessary, our estimates of asset retirement obligation liabilities. 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 and make adjustments as appropriate.
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, 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. There can sometimes be a range of reasonable estimates of the costs associated with remediation of a site. In these cases, 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 such 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 as of June 30, 2024 would be approximately $375 million higher than the amount 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.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table summarizes the activity in our environmental remediation liabilities for the six months ended June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| Environmental remediation liabilities, beginning of year | $ | 485.4 | $ | 487.5 | |||||||
| Payments | (26.7) | (21.2) | |||||||||
| Accretion expense (non-cash interest expense) | 8.4 | 9.0 | |||||||||
| Acquisitions, net of divestitures and other adjustments | 0.7 | 32.4 | |||||||||
| Environmental remediation liabilities, end of period | 467.8 | 507.7 | |||||||||
| Less: current portion | (66.2) | (63.4) | |||||||||
| Long-term portion | $ | 401.6 | $ | 444.3 |
Bridgeton Landfill. During the six months ended June 30, 2024, we paid $5.4 million related to management and monitoring of the remediation area for our closed Bridgeton Landfill in Missouri. We continue to work with state and federal regulatory agencies on our remediation efforts. From time to time, this may require us to modify our future operating timeline and procedures, which could result in changes to our expected liability. As of June 30, 2024, the remediation liability recorded for this site was $68.2 million, of which approximately $8 million is expected to be paid during the remainder of 2024.
West Lake Landfill Superfund Site. Our subsidiary Bridgeton Landfill, LLC is one of several currently designated Potentially Responsible Parties for the West Lake Landfill Superfund site (West Lake) in Missouri. On September 27, 2018, the United States Environmental Protection Agency (EPA) issued a Record of Decision Amendment for West Lake that includes a total undiscounted cost estimate of $229 million over a four to five year design and construction timeline. On March 11, 2019, the EPA issued special notice letters under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) to Bridgeton Landfill, LLC and the other currently designated Potentially Responsible Parties to initiate negotiations to implement the remedy. At this time we are neither able to predict the final design of that remedy, nor estimate how much of the future response costs of the site our subsidiary may agree or be required to pay. During any subsequent administrative proceedings or litigation, our subsidiary will vigorously contest liability for the costs of remediating radiologically-impacted materials generated on behalf of the federal government during the Manhattan Project and delivered to the site by an Atomic Energy Commission licensee and its subcontractor. Currently, we believe we are adequately reserved for our expected remediation liability. However, subsequent events related to remedy design, divisibility, or allocation may require us to modify our expected remediation liability.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. DEBT
The carrying value of our credit facilities, finance leases and long-term debt as of June 30, 2024 and December 31, 2023 is listed in the following table, and is adjusted for unamortized discounts, deferred issuance costs and the unamortized portion of adjustments to fair value recorded in purchase accounting. Original issue discounts, deferred issuance costs, 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.
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Maturity | Interest Rate | Principal | Adjustments | Carrying Value | Principal | Adjustments | Carrying Value | |||||||||||||||||||||||||||||||||||||
| Credit facilities: | ||||||||||||||||||||||||||||||||||||||||||||
| Uncommitted Credit Facility | Variable | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||
| $3.5 billion - August 2026 | Variable | 182.7 | — | 182.7 | 297.1 | — | 297.1 | |||||||||||||||||||||||||||||||||||||
| Term Loan | Variable | — | — | — | 500.0 | — | 500.0 | |||||||||||||||||||||||||||||||||||||
| Commercial Paper | Variable | 180.0 | (0.1) | 179.9 | 496.0 | (0.7) | 495.3 | |||||||||||||||||||||||||||||||||||||
| Senior notes: | ||||||||||||||||||||||||||||||||||||||||||||
| August 2024 | 2.500 | 900.0 | (0.2) | 899.8 | 900.0 | (1.2) | 898.8 | |||||||||||||||||||||||||||||||||||||
| March 2025 | 3.200 | 500.0 | (0.5) | 499.5 | 500.0 | (0.9) | 499.1 | |||||||||||||||||||||||||||||||||||||
| November 2025 | 0.875 | 350.0 | (0.9) | 349.1 | 350.0 | (1.2) | 348.8 | |||||||||||||||||||||||||||||||||||||
| July 2026 | 2.900 | 500.0 | (1.3) | 498.7 | 500.0 | (1.6) | 498.4 | |||||||||||||||||||||||||||||||||||||
| November 2027 | 3.375 | 650.0 | (2.1) | 647.9 | 650.0 | (2.5) | 647.5 | |||||||||||||||||||||||||||||||||||||
| May 2028 | 3.950 | 800.0 | (8.0) | 792.0 | 800.0 | (8.9) | 791.1 | |||||||||||||||||||||||||||||||||||||
| April 2029 | 4.875 | 750.0 | (7.0) | 743.0 | 750.0 | (6.9) | 743.1 | |||||||||||||||||||||||||||||||||||||
| November 2029 | 5.000 | 400.0 | (3.8) | 396.2 | — | — | — | |||||||||||||||||||||||||||||||||||||
| March 2030 | 2.300 | 600.0 | (4.2) | 595.8 | 600.0 | (4.5) | 595.5 | |||||||||||||||||||||||||||||||||||||
| February 2031 | 1.450 | 650.0 | (5.8) | 644.2 | 650.0 | (6.2) | 643.8 | |||||||||||||||||||||||||||||||||||||
| February 2032 | 1.750 | 750.0 | (5.1) | 744.9 | 750.0 | (5.4) | 744.6 | |||||||||||||||||||||||||||||||||||||
| March 2033 | 2.375 | 700.0 | (6.2) | 693.8 | 700.0 | (6.5) | 693.5 | |||||||||||||||||||||||||||||||||||||
| December 2033 | 5.000 | 650.0 | (9.5) | 640.5 | 650.0 | (8.9) | 641.1 | |||||||||||||||||||||||||||||||||||||
| April 2034 | 5.000 | 800.0 | (10.3) | 789.7 | 800.0 | (10.7) | 789.3 | |||||||||||||||||||||||||||||||||||||
| November 2034 | 5.200 | 500.0 | (5.6) | 494.4 | — | — | — | |||||||||||||||||||||||||||||||||||||
| March 2035 | 6.086 | 181.9 | (11.2) | 170.7 | 181.9 | (11.5) | 170.4 | |||||||||||||||||||||||||||||||||||||
| March 2040 | 6.200 | 399.9 | (3.2) | 396.7 | 399.9 | (3.3) | 396.6 | |||||||||||||||||||||||||||||||||||||
| May 2041 | 5.700 | 385.7 | (4.6) | 381.1 | 385.7 | (4.7) | 381.0 | |||||||||||||||||||||||||||||||||||||
| March 2050 | 3.050 | 400.0 | (6.7) | 393.3 | 400.0 | (6.8) | 393.2 | |||||||||||||||||||||||||||||||||||||
| Debentures: | ||||||||||||||||||||||||||||||||||||||||||||
| September 2035 | 7.400 | 148.1 | (28.2) | 119.9 | 148.1 | (28.8) | 119.3 | |||||||||||||||||||||||||||||||||||||
| Tax-exempt: | ||||||||||||||||||||||||||||||||||||||||||||
| 2024 - 2054 | 3.500 - 4.375 | 1,439.1 | (9.7) | 1,429.4 | 1,289.1 | (8.5) | 1,280.6 | |||||||||||||||||||||||||||||||||||||
| Finance leases: | ||||||||||||||||||||||||||||||||||||||||||||
| 2024 - 2063 | 0.810 - 9.750 | 276.5 | — | 276.5 | 251.3 | — | 251.3 | |||||||||||||||||||||||||||||||||||||
| Total Debt | $ | 13,093.9 | $ | (134.2) | 12,959.7 | $ | 12,949.1 | $ | (129.7) | 12,819.4 | ||||||||||||||||||||||||||||||||||
| Less: current portion | (1,432.9) | (932.3) | ||||||||||||||||||||||||||||||||||||||||||
| Long-term portion | $ | 11,526.8 | $ | 11,887.1 |
Credit Facilities
Uncommitted Credit Facility
In January 2022, we entered into a $200.0 million unsecured uncommitted revolving credit facility (the Uncommitted Credit Facility). The Uncommitted Credit Facility bears interest at an annual percentage rate to be agreed upon by both parties.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Borrowings under the Uncommitted Credit Facility can be used for working capital, letters of credit, and other general corporate purposes. The agreement governing our Uncommitted Credit Facility requires us to comply with certain covenants. The Uncommitted Credit Facility may be terminated by either party at any time. As of both June 30, 2024 and December 31, 2023, we had no borrowings outstanding under our Uncommitted Credit Facility.
The Credit Facility
In August 2021, we entered into a $3.0 billion unsecured revolving credit facility (as amended, the Credit Facility). Borrowings under the Credit Facility mature in August 2026. As permitted by the Credit Facility, we have the right to request two one-year extensions of the maturity date, but none of the lenders are committed to participate in such extensions. The Credit Facility also includes a feature that allows us to increase availability, at our option, by an aggregate amount of up to $1.0 billion through increased commitments from existing lenders or the addition of new lenders. In October 2023, we completed an upsize of the Credit Facility to $3.5 billion.
In February 2023, we entered into Amendment No. 1 to the Credit Facility to add our subsidiary, USE Canada Holdings, Inc.(the Canadian Borrower), as an additional borrower under the Credit Facility, and provided that the aggregate of (i) all loans to the Canadian Borrower and (ii) all loans denominated in Canadian dollars cannot exceed $500.0 million (the Canadian Sublimit). In October 2023, we entered into Amendment No. 2 to the Credit Facility which increased the Canadian Sublimit to $1.0 billion. The Canadian Sublimit is part of, and not in addition to, the aggregate commitments under the Credit Facility.
Borrowings under the Credit Facility in United States dollars bear interest at a Base Rate, a daily floating SOFR or a term SOFR plus a current applicable margin of 0.910% based on our Debt Ratings (all as defined in the Credit Facility agreement). The Canadian dollar-denominated loans bear interest based on the Canadian Prime Rate or the Canadian Dollar Offered Rate plus a current applicable margin of 0.910% based on our Debt Ratings. As of June 30, 2024 and December 31, 2023, C$249.9 million and C$201.5 million, respectively, were outstanding against the Canadian Sublimit. The weighted average interest rate for borrowings outstanding as of June 30, 2024 was 6.223%.
The Credit Facility is subject to facility fees based on applicable rates defined in the Credit Facility agreement and the aggregate commitment, regardless of usage. The Credit Facility can be used for working capital, capital expenditures, acquisitions, letters of credit and other general corporate purposes. The Credit Facility agreement requires us to comply with financial and other covenants. We may pay dividends and repurchase common stock if we are in compliance with these covenants.
We had $182.7 million and $297.1 million of borrowings outstanding under the Credit Facility as of June 30, 2024 and December 31, 2023, respectively. We had $315.4 million and $336.5 million of letters of credit outstanding under the Credit Facility as of June 30, 2024 and December 31, 2023, respectively. We also had $179.9 million and $495.3 million of principal borrowings outstanding (net of related discount on issuance) under the commercial paper program as of June 30, 2024 and December 31, 2023, respectively. As a result, availability under our Credit Facility was $2,821.9 million and $2,371.2 million as of June 30, 2024 and December 31, 2023, respectively.
Term Loan Facility
On April 29, 2022, we entered into a $1.0 billion term loan facility (the Term Loan Facility) which bears interest at a base rate or a forward-looking SOFR, plus an applicable margin based on our debt ratings. We had $500.0 million of borrowings outstanding under the Term Loan Facility as of December 31, 2023. During the six months ended June 30, 2024, we paid down the remaining balance of the Term Loan Facility.
Commercial Paper Program
We have entered into a commercial paper program for the issuance and sale of unsecured commercial paper in an aggregate principal amount not to exceed $1.5 billion outstanding at any one time. The weighted average interest rate for borrowings outstanding as of June 30, 2024 was 5.515% with a weighted average maturity of 24 days.
We had $180.0 million and $496.0 million in aggregate principal amount of commercial paper issued and outstanding under the program as of June 30, 2024 and December 31, 2023, respectively. In the event of a failed re-borrowing, we currently have availability under our Credit Facility to fund the commercial paper program until it is re-borrowed successfully. Accordingly, we have classified these borrowings as long-term in our consolidated balance sheet as of June 30, 2024.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Senior Notes and Debentures
In March 2023, we issued $400.0 million of 4.875% senior notes due 2029 (the Existing 2029 Notes) and $800.0 million of 5.000% senior notes due 2034. We used the proceeds from the March 2023 notes issuance for general corporate purposes, including the repayment of a portion of amounts outstanding under the Uncommitted Credit Facility, the Commercial Paper Program, the Credit Facility, and the Term Loan Facility. As a result of the Term Loan Facility repayment, we incurred a non-cash loss on the early extinguishment of debt related to the ratable portion of unamortized deferred issuance costs of $0.2 million.
In December 2023, we issued an additional $350.0 million of 4.875% senior notes due 2029 (the New 2029 Notes, and together with the Existing 2029 Notes, the 2029 Notes). After giving effect to the issuance of the New 2029 Notes, $750.0 million in aggregate principal amount of the 2029 Notes is outstanding. The New 2029 Notes are fungible with the Existing 2029 Notes, and taken together, the 2029 Notes are treated as a single series.
In December 2023, we also issued $650.0 million of 5.000% senior notes due 2033 (the 5.000% 2033 Notes). The proceeds of the December 2023 notes issuance were used for general corporate purposes, including the repayment of a portion of amounts outstanding under the Uncommitted Credit Facility, the Commercial Paper Program, the Credit Facility, and the Term Loan Facility.
In June 2024, we issued $400.0 million of 5.000% senior notes due 2029 (the 5.000% 2029 Notes) and $500.0 million of 5.200% senior notes due 2034, (the 5.200% 2034 Notes). We used the proceeds from the June 2024 notes issuance for general corporate purposes, including the repayment of a portion of amounts outstanding under the Commercial Paper Program and the Credit Facility; and repayment of the remaining amount outstanding under the Term Loan Facility and the Uncommitted Credit Facility.
Our senior notes and debentures are general unsecured and unsubordinated obligations and rank equally with our other unsecured obligations.
Interest Rate Swap and Lock Agreements
Our ability to obtain financing through the capital markets is a key component of our financial strategy. Historically, we have managed risk associated with executing this strategy, particularly as it relates to fluctuations in interest rates, by using a combination of fixed and floating rate debt. From time to time, we also have entered into interest rate swap and lock agreements to manage risk associated with interest rates, either to effectively convert specific fixed rate debt to a floating rate (fair value hedges), or to lock interest rates in anticipation of future debt issuances (cash flow hedges).
Cash Flow Hedges
We have historically entered into multiple swap agreements designated as cash flow hedges to manage exposure to fluctuations in interest rates in anticipation of planned future issuances of senior notes. Upon the expected issuance of senior notes, we terminate the interest rate locks and settle with our counterparties. These transactions are accounted for as cash flow hedges.
The fair value of our interest rate locks is determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (Level 2 in the fair value hierarchy).
During the six months ended June 30, 2023, we recognized an unrealized gain in other comprehensive loss of $1.7 million, net of tax, related to terminated interest rate locks issued in conjunction with the issuance of our 5.000% notes in March 2023. As of June 30, 2024 and December 31, 2023, our previously terminated interest rate locks were recorded as components of accumulated other comprehensive loss of $14.1 million and $15.9 million, respectively, net of tax. The effective portion of the interest rate locks is amortized as an adjustment to interest expense over the life of the issued debt using the effective interest method. For the three months ended June 30, 2024 and 2023, we recognized losses, net of tax, of $0.9 million and $1.0 million, respectively. For the six months ended June 30, 2024 and 2023, we recognized losses, net of tax, of $1.7 million and $2.0 million, respectively. Over the next 12 months, we expect to amortize $1.1 million, net of tax, from accumulated other comprehensive loss to interest expense as a yield adjustment of our senior notes.
In connection with our acquisition of US Ecology, in the second quarter of 2022, we acquired and novated a floating-to-fixed interest rate swap agreement (the 2022 Interest Rate Swap) with an initial effective date of March 6, 2020, an initial notional amount of $500 million relative to our Term Loan Facility and an initial fair value of $29.1 million. The initial fair value was reclassified into earnings as non-cash interest expense on a systematic basis over the life of the interest rate swap. In June 2024, the Company terminated the 2022 Interest Rate Swap and received $23.7 million in conjunction with this settlement. As of December 31, 2023, the 2022 Interest Rate Swap was recorded at its fair value of $24.3 million and was included in other assets in our consolidated balance sheets.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
For the three and six months ended June 30, 2024, we recognized unrealized gains of $1.2 million and $6.3 million, respectively, in accumulated other comprehensive income for the 2022 Interest Rate Swap. For the three and six months ended June 30, 2023, we recognized unrealized gains of $7.3 million and $10.8 million, respectively, in accumulated other comprehensive income for the 2022 Interest Rate Swap. As of December 31, 2023, the 2022 Interest Rate Swap was recorded as a gain within accumulated other comprehensive loss of $4.3 million, net of tax. For the three and six months ended June 30, 2024, we recognized gains, net of tax, of $7.7 million and $10.6 million, respectively. For the three and six months ended June 30, 2023, we recognized gains, net of tax, of $3.2 million and $6.8 million, respectively, related to this amortization.
For further detail regarding the effect of our cash flow hedging on interest expense, refer to Note 11, Financial Instruments, of the notes to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Derivative Contracts
Contemporaneously with the issuance of our 2.300% notes in February 2020, we amended interest rate lock agreements with an aggregate notional value of $550.0 million, extending the mandatory maturity date from 2020 to 2030, and dedesignated them as cash flow hedges (2020 Extended Interest Rate Locks). Contemporaneously with the issuance of our 2.500% notes in August 2019, we amended interest rate lock agreements with an aggregate notional value of $375.0 million, extending the mandatory maturity date from 2019 to 2024, and dedesignated them as cash flow hedges (2019 Extended Interest Rate Locks and collectively with the 2020 Extended Interest Rate Locks, the Extended Interest Rate Locks). There was no ineffectiveness recognized in the termination of these cash flow hedges. In addition, we entered into interest rate swaps to offset future exposures to fair value fluctuations of the Extended Interest Rate Locks (2019 Offsetting Interest Rate Swap and the 2020 Offsetting Interest Rate Swap, or collectively the Offsetting Interest Rate Swaps). The fair value of these free-standing derivatives was determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (Level 2 in the fair value hierarchy).
As of June 30, 2024, the fair value of the Extended Interest Rate Locks were assets of $59.3 million, which were included in other assets in our consolidated balance sheet. As of December 31, 2023, the fair value of the Extended Interest Rate Locks were assets of $54.0 million, which were included in prepaids and other current assets and other assets in our consolidated balance sheets. As of June 30, 2024 and December 31, 2023, the fair value of the Offsetting Interest Rate Swaps were liabilities of $79.9 million and $78.2 million, respectively, which were included in other accrued liabilities and other long-term liabilities in our consolidated balance sheets.
For the three months ended June 30, 2024 and 2023, we recognized losses of $8.0 million and gains of $9.2 million, respectively, on the change in fair value of the Extended Interest Rate Locks with offsetting gains of $7.9 million and losses of $9.4 million, respectively, on the change in fair value of the Offsetting Interest Rate Swaps. For the six months ended June 30, 2024 and 2023, we recognized gains of $5.5 million and losses of $4.6 million, respectively, on the change in fair value of the Extended Interest Rate Locks with offsetting losses of $5.6 million and gains of $3.3 million, respectively, on the change in fair value of the Offsetting Interest Rate Swaps. The changes in fair value were recorded directly in earnings as an adjustment to interest expense in our consolidated statements of income.
Tax-Exempt Financings
As of June 30, 2024 and December 31, 2023, we had $1,429.4 million and $1,280.6 million, respectively, of certain variable rate tax-exempt financings outstanding, with maturities ranging from 2024 to 2054 and from 2024 to 2053, respectively.
In June 2024, the Mission Economic Development Corporation issued, for our benefit, $50 million in principal amount of Solid Waste Disposal Revenue Bonds. The proceeds from the issuances, after deferred issuance costs, were used to fund the acquisition, construction, improvement, installation, and/or equipping of certain solid waste disposal facilities located within Texas.
In both March 2024 and September 2023, the California Municipal Finance Authority issued, for our benefit, $100 million in principal amount of Solid Waste Disposal Revenue Bonds. The proceeds from the issuances, after deferred issuance costs, were used to fund the acquisition, construction, improvement, installation, and/or equipping of certain solid waste disposal facilities located within California.
The initial remarketing period for these tax-exempt financings is 10 years. Our remaining tax-exempt financings are remarketed either quarterly or semiannually by remarketing agents to effectively maintain a variable yield. The holders of the bonds can put them back to the remarketing agents at the end of each interest period. If the remarketing agents are unable to remarket our bonds, the remarketing agents can put the bonds to us. In the event of a failed remarketing, we currently have availability under our Credit Facility to fund these bonds until they are remarketed successfully. Accordingly, we classified these borrowings as long-term in our consolidated balance sheets as of June 30, 2024 and December 31, 2023.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Finance Leases
As of June 30, 2024 and December 31, 2023, we had finance lease liabilities of $276.5 million and $251.3 million, respectively, with maturities ranging from 2024 to 2063 for both periods.
8. INCOME TAXES
Our effective tax rate, exclusive of non-controlling interests, for the three and six months ended June 30, 2024 was 21.7% and 22.9%, respectively. Our effective tax rate, exclusive of non-controlling interests, for the three and six months ended June 30, 2023 was 26.3% and 26.4%, respectively. Our effective tax rate for the three and six months ended June 30, 2024 reflects a benefit of $32.6 million and $41.0 million, respectively, due to our investments in renewable energy assets qualifying for tax credits under Section 48 of the Internal Revenue Code.
For the six months ended June 30, 2024 and 2023, net cash paid for income taxes was $109.3 million and $88.0 million, respectively.
We have deferred tax assets related to state net operating loss carryforwards. We provide a partial valuation allowance due to uncertainty surrounding the future utilization of these carryforwards in the taxing jurisdictions where the loss carryforwards exist. When determining the need for a valuation allowance, we consider all positive and negative evidence, including recent financial results, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies. The realization of our deferred tax asset for state loss carryforwards ultimately depends upon the existence of sufficient taxable income in the appropriate state taxing jurisdictions in future periods. The weight given to the positive and negative evidence is commensurate with the extent such evidence can be objectively verified. We continue to regularly monitor both positive and negative evidence in determining the ongoing need for a valuation allowance. As of June 30, 2024, the valuation allowance associated with our state loss carryforwards was $43.5 million.
We are subject to income tax in the United States, as well as income tax in multiple state and foreign jurisdictions. Our compliance with income tax rules and regulations is periodically audited by taxing authorities. These authorities may challenge the positions taken in our tax filings. Thus, to provide for certain potential tax exposures, we maintain liabilities for uncertain tax positions for our estimate of the final outcome of these examinations. Our federal statute of limitations is closed through 2019. In addition, we are currently under state examination or administrative review in various jurisdictions for tax years 2012 through 2022.
We believe the 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 and cash flows. As of June 30, 2024, we are unable to estimate the resolution of our gross unrecognized benefits over the next 12 months.
We recognize interest and penalties as incurred within the provision for income taxes in the consolidated statement of income. As of June 30, 2024, we accrued a liability for penalties of $0.3 million and a liability for interest (including interest on penalties) of $12.6 million related to our uncertain tax positions.
9. STOCK REPURCHASES, DIVIDENDS AND EARNINGS PER SHARE
Available Shares
We currently have approximately 11.3 million shares of common stock reserved for future grants under the Republic Services, Inc. 2021 Stock Incentive Plan.
Stock Repurchases
In October 2023, our Board of Directors approved a $3.0 billion share repurchase authorization effective January 1, 2024 and extending through December 31, 2026. Share repurchases under the program may be made through open market purchases or privately negotiated transactions in accordance with applicable federal securities laws. While the Board of Directors has approved the program, the timing of any purchases, the prices and the number of shares of common stock to be purchased will be determined by our management, at its discretion, and will depend upon market conditions and other factors. On a quarterly basis, our Board of Directors reviews the parameters around which we repurchase our shares. The share repurchase program may be extended, suspended or discontinued at any time.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Stock repurchase activity during three and six months ended June 30, 2024 and 2023 follows (in millions, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Number of shares repurchased | 0.9 | — | 0.9 | — | |||||||||||||||||||
| Amount paid | $ | 167.6 | $ | — | $ | 167.6 | $ | — | |||||||||||||||
| Weighted average cost per share | $ | 186.24 | $ | — | $ | 186.24 | $ | — |
The average price paid per share, total repurchase costs and approximate maximum dollar value of the shares that may yet be purchased under the plans or programs exclude a 1% excise tax.
As of June 30, 2024 and 2023, no repurchased shares were pending settlement. As of June 30, 2024, the remaining authorized purchase capacity under our October 2023 repurchase program was $2.8 billion.
Dividends
In April 2024, our Board of Directors approved a quarterly dividend of $0.535 per share. Cash dividends declared were $336.5 million for the six months ended June 30, 2024. As of June 30, 2024, we recorded a quarterly dividend payable of $168.0 million to shareholders of record at the close of business on July 2, 2024.
Earnings per Share
Basic earnings per share is computed by dividing net income attributable to Republic Services, Inc. by the weighted average number of common shares (including vested but unissued restricted stock units and performance 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 unvested restricted stock units (RSUs) and the unvested performance stock units (PSUs) at the expected attainment levels. We use the treasury stock method in computing diluted earnings per share.
Earnings per share for the three and six months ended June 30, 2024 and 2023 are calculated as follows (in thousands, except per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||||||||||||||
| Net income attributable to Republic Services, Inc. | $ | 511,536 | $ | 427,398 | $ | 965,330 | $ | 811,250 | |||||||||||||||||||||||||||
| Weighted average common shares outstanding | 314,910 | 316,849 | $ | 315,102 | $ | 316,781 | |||||||||||||||||||||||||||||
| Basic earnings per share | $ | 1.62 | $ | 1.35 | $ | 3.06 | $ | 2.56 | |||||||||||||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||||||||||||||
| Net income attributable to Republic Services, Inc. | $ | 511,536 | $ | 427,398 | $ | 965,330 | $ | 811,250 | |||||||||||||||||||||||||||
| Weighted average common shares outstanding | 314,910 | 316,849 | 315,102 | 316,781 | |||||||||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||||||||
| Unvested RSU awards | 115 | 101 | 120 | 88 | |||||||||||||||||||||||||||||||
| Unvested PSU awards | 211 | 359 | 316 | 357 | |||||||||||||||||||||||||||||||
| Weighted average common and common equivalent shares outstanding | 315,236 | 317,309 | 315,538 | 317,226 | |||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 1.62 | $ | 1.35 | $ | 3.06 | $ | 2.56 |
During the three and six months ended June 30, 2024 there were no antidilutive securities outstanding. During the three and six months ended June 30, 2023 there were less than 0.1 million antidilutive securities outstanding.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS BY COMPONENT
A summary of changes in accumulated other comprehensive loss, net of tax, by component, for the six months ended June 30, 2024 follows:
| Cash Flow Hedges | Defined Benefit Pension Items | Foreign Currency Translation | Total | ||||||||||||||||||||
| Balance as of December 31, 2023 | $ | (11.6) | $ | 8.9 | $ | (9.4) | $ | (12.1) | |||||||||||||||
| Other comprehensive income before reclassifications | 6.4 | — | 5.5 | 11.9 | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | (8.9) | — | — | (8.9) | |||||||||||||||||||
| Net current period other comprehensive income | (2.5) | — | 5.5 | 3.0 | |||||||||||||||||||
| Balance as of June 30, 2024 | $ | (14.1) | $ | 8.9 | $ | (3.9) | $ | (9.1) |
A summary of reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2024 and 2023 follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||||||||
| Details about Accumulated Other Comprehensive Loss Components | Amount Reclassified from Accumulated Other Comprehensive Loss | Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Statement where Net Income is Presented | |||||||||||||||||||||||||||||||||||||||||
| Gain (loss) on cash flow hedges: | ||||||||||||||||||||||||||||||||||||||||||||
| Terminated interest rate locks | $ | (1.2) | $ | (1.3) | $ | (2.3) | $ | (2.7) | Interest expense | |||||||||||||||||||||||||||||||||||
| 2022 interest rate swap | 10.4 | 4.3 | 14.3 | 9.2 | Interest expense | |||||||||||||||||||||||||||||||||||||||
| Total before tax | 9.2 | 3.0 | 12.0 | 6.5 | ||||||||||||||||||||||||||||||||||||||||
| Tax provision | (2.4) | (0.8) | (3.1) | (1.7) | ||||||||||||||||||||||||||||||||||||||||
| Total income reclassified into earnings, net of tax | $ | 6.8 | $ | 2.2 | $ | 8.9 | $ | 4.8 | ||||||||||||||||||||||||||||||||||||
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
11. FINANCIAL INSTRUMENTS
The effect of our hedging relationships and derivative instruments on the consolidated statements of income for the three and six months ended June 30, 2024 and 2023 follows (in millions):
| Classification and amount of gain (loss) recognized in income on hedging relationships and derivative instruments | ||||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Interest Expense | Interest Expense | Interest Expense | Interest Expense | |||||||||||||||||||||||||||||
| Total amount of expense line items presented in the consolidated statements of income in which the effects of hedging relationships and derivative instruments are recorded | $ | (128.3) | $ | (124.4) | $ | (267.6) | $ | (251.1) | ||||||||||||||||||||||||
| The effects of cash flow hedging relationships in Subtopic 815-20: | ||||||||||||||||||||||||||||||||
| (Loss) gain on cash flow hedging relationships: | ||||||||||||||||||||||||||||||||
| Interest rate swap locks | $ | (0.9) | $ | (1.0) | $ | (1.7) | $ | (2.0) | ||||||||||||||||||||||||
| 2022 interest rate swap | $ | 6.6 | $ | 1.6 | $ | 8.0 | $ | (0.6) | ||||||||||||||||||||||||
| The effects of derivative instruments not in Subtopic 815-20: | ||||||||||||||||||||||||||||||||
| Loss on free-standing derivative instruments: | ||||||||||||||||||||||||||||||||
| Interest rate contract: | ||||||||||||||||||||||||||||||||
| Net loss on change in fair value of free-standing derivative instruments | $ | (0.1) | $ | (0.2) | $ | (0.1) | $ | (1.3) |
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.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The carrying value for certain of our financial instruments, including cash, accounts receivable, current investments, accounts payable and certain other accrued liabilities, approximates fair value because of their short-term nature. As of June 30, 2024 and December 31, 2023, our assets and liabilities that are measured at fair value on a recurring basis include the following:
| June 30, 2024 | |||||||||||||||||||||||||||||
| Fair Value | |||||||||||||||||||||||||||||
| Carrying Amount | Total | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Money market mutual funds | $ | 45.1 | $ | 45.1 | $ | 45.1 | $ | — | $ | — | |||||||||||||||||||
| Bonds - restricted cash and marketable securities and other assets | 77.1 | 77.1 | — | 77.1 | — | ||||||||||||||||||||||||
| Derivative and hedging assets - other assets | 59.3 | 59.3 | — | 59.3 | — | ||||||||||||||||||||||||
| Total assets | $ | 181.5 | $ | 181.5 | $ | 45.1 | $ | 136.4 | $ | — | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Derivative and hedging liabilities - other accrued liabilities and other long-term liabilities | $ | 79.9 | $ | 79.9 | $ | — | $ | 79.9 | $ | — | |||||||||||||||||||
| Contingent consideration - other accrued liabilities and other long-term liabilities | 63.8 | 63.8 | — | — | 63.8 | ||||||||||||||||||||||||
| Total liabilities | $ | 143.7 | $ | 143.7 | $ | — | $ | 79.9 | $ | 63.8 |
| December 31, 2023 | |||||||||||||||||||||||||||||
| Fair Value | |||||||||||||||||||||||||||||
| Carrying Amount | Total | Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Money market mutual funds | $ | 43.1 | $ | 43.1 | $ | 43.1 | $ | — | $ | — | |||||||||||||||||||
| Bonds - restricted cash and marketable securities and other assets | 76.3 | 76.3 | — | 76.3 | — | ||||||||||||||||||||||||
| Derivative and hedging assets - prepaid and other current assets and other assets | 78.3 | 78.3 | — | 78.3 | — | ||||||||||||||||||||||||
| Total assets | $ | 197.7 | $ | 197.7 | $ | 43.1 | $ | 154.6 | $ | — | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Derivative and hedging liabilities - other accrued liabilities and other long-term liabilities | $ | 79.6 | $ | 79.6 | $ | — | $ | 79.6 | $ | — | |||||||||||||||||||
| Contingent consideration - other accrued liabilities and other long-term liabilities | 63.6 | 63.6 | — | — | 63.6 | ||||||||||||||||||||||||
| Total liabilities | $ | 143.2 | $ | 143.2 | $ | — | $ | 79.6 | $ | 63.6 |
Total Debt
The carrying value of our total debt was $13.0 billion and $12.8 billion as of June 30, 2024 and December 31, 2023, respectively, and the fair value of our total debt was $12.3 billion and $12.5 billion as of June 30, 2024 and December 31, 2023, respectively. The estimated fair value of our fixed rate senior notes and debentures is based on quoted market prices. The fair value of our remaining notes payable, tax-exempt financings and borrowings under our credit facilities approximates the carrying value because the interest rates are variable. The fair value estimates were based on Level 2 inputs of the fair value hierarchy as of June 30, 2024 and December 31, 2023. See Note 7, Debt, for further information related to our debt.
Contingent Consideration
In 2015, we entered into a waste management contract with the County of Sonoma, California to operate the county's waste management facilities. As of June 30, 2024, the Sonoma contingent consideration represents the fair value of $59.2 million
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
payable to the County of Sonoma based on the achievement of future annual tonnage targets through the expected remaining capacity of the landfill. The potential undiscounted amount of all future contingent payments that we could be required to make under the waste management contract is estimated to be between approximately $81 million and $114 million. During the six months ended June 30, 2024, the activity in the contingent consideration liability included accretion, which was offset by concession payments made in the ordinary course of business. There were no changes to the estimate of fair value.
12. SEGMENT REPORTING
Our senior management evaluates, oversees and manages the financial performance of our operations through three field groups, referred to as Group 1, Group 2 and Group 3. Group 1 is our recycling and waste business operating primarily in geographic areas located in the western United States. Group 2 is our recycling and waste business operating primarily in geographic areas located in the southeastern and mid-western United States, the eastern seaboard of the United States, and Canada. Group 3 is our environmental solutions business operating primarily in geographic areas located across the United States and Canada. These groups are presented below as our reportable segments, which each provide integrated environmental services, including but not limited to collection, transfer, recycling, and disposal.
Adjusted EBITDA is the single financial measure our chief operating decision maker (CODM) uses to evaluate operating segment profitability and determine resource allocations.
Summarized financial information concerning our reportable segments for the three months ended June 30, 2024 and 2023 follows:
| Group 1 | Group 2 | Recycling & Waste Subtotal (1) | Group 3 (Environmental Solutions) | Corporate entities and other | Total | ||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Gross Revenue | $ | 2,090.8 | $ | 2,004.5 | $ | 4,095.3 | $ | 480.5 | $ | 87.4 | $ | 4,663.2 | |||||||||||||||||||||||
| Intercompany Revenue | (314.4) | (269.9) | (584.3) | (13.1) | (17.8) | (615.2) | |||||||||||||||||||||||||||||
| Revenue allocations | 33.3 | 31.1 | 64.4 | 5.2 | (69.6) | — | |||||||||||||||||||||||||||||
| Net Revenue | $ | 1,809.7 | $ | 1,765.7 | $ | 3,575.4 | $ | 472.6 | $ | — | $ | 4,048.0 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 590.3 | $ | 555.2 | $ | 1,145.5 | $ | 112.3 | $ | — | $ | 1,257.8 | |||||||||||||||||||||||
| Capital Expenditures | $ | 136.1 | $ | 124.1 | $ | 260.2 | $ | 26.3 | $ | 116.9 | $ | 403.4 | |||||||||||||||||||||||
| Total Assets | $ | 13,659.3 | $ | 10,954.4 | $ | 24,613.7 | $ | 4,448.1 | $ | 2,872.3 | $ | 31,934.1 | |||||||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||
| Gross Revenue | $ | 1,933.7 | $ | 1,907.6 | $ | 3,841.3 | $ | 419.5 | $ | 60.6 | $ | 4,321.4 | |||||||||||||||||||||||
| Intercompany Revenue | (299.4) | (260.0) | (559.4) | (14.6) | (21.5) | (595.5) | |||||||||||||||||||||||||||||
| Revenue allocations | 23.3 | 22.4 | 45.7 | (6.6) | (39.1) | — | |||||||||||||||||||||||||||||
| Net Revenue | $ | 1,657.6 | $ | 1,670.0 | $ | 3,327.6 | $ | 398.3 | $ | — | $ | 3,725.9 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 527.1 | $ | 499.2 | $ | 1,026.3 | $ | 89.8 | $ | — | $ | 1,116.1 | |||||||||||||||||||||||
| Capital Expenditures | $ | 125.9 | $ | 136.0 | $ | 261.9 | $ | 16.9 | $ | 56.9 | $ | 335.7 | |||||||||||||||||||||||
| Total Assets | $ | 13,024.0 | $ | 10,780.1 | $ | 23,804.1 | $ | 3,971.5 | $ | 2,047.7 | $ | 29,823.3 |
(1) The Recycling & Waste Subtotal represents the combined results of our Group 1 and Group 2 reportable segments.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Summarized financial information concerning our reportable segments for the six months ended June 30, 2024 and 2023 follows:
| Group 1 | Group 2 | Recycling & Waste Subtotal (1) | Group 3 (Environmental Solutions) | Corporate entities and other | Total | ||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||
| Gross Revenue | $ | 4,108.8 | $ | 3,917.7 | $ | 8,026.5 | $ | 909.5 | $ | 166.5 | $ | 9,102.5 | |||||||||||||||||||||||
| Intercompany Revenue | (615.1) | (518.3) | (1,133.4) | (24.5) | (34.8) | (1,192.7) | |||||||||||||||||||||||||||||
| Revenue allocations | 62.5 | 58.3 | 120.8 | 10.9 | (131.7) | — | |||||||||||||||||||||||||||||
| Net Revenue | $ | 3,556.2 | $ | 3,457.7 | $ | 7,013.9 | $ | 895.9 | $ | — | $ | 7,909.8 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,149.2 | $ | 1,074.2 | $ | 2,223.4 | $ | 198.9 | $ | — | $ | 2,422.3 | |||||||||||||||||||||||
| Capital Expenditures | $ | 318.1 | $ | 257.8 | $ | 575.9 | $ | 60.6 | $ | 281.4 | $ | 917.9 | |||||||||||||||||||||||
| Total Assets | $ | 13,659.3 | $ | 10,954.4 | $ | 24,613.7 | $ | 4,448.1 | $ | 2,872.3 | $ | 31,934.1 | |||||||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||
| Gross Revenue | $ | 3,774.0 | $ | 3,725.9 | $ | 7,499.9 | $ | 840.6 | $ | 128.0 | $ | 8,468.5 | |||||||||||||||||||||||
| Intercompany Revenue | (586.5) | (502.5) | (1,089.0) | (29.4) | (43.1) | (1,161.5) | |||||||||||||||||||||||||||||
| Revenue allocations | 45.6 | 43.9 | 89.5 | (4.6) | (84.9) | — | |||||||||||||||||||||||||||||
| Net Revenue | $ | 3,233.1 | $ | 3,267.3 | $ | 6,500.4 | $ | 806.6 | $ | — | $ | 7,307.0 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,016.6 | $ | 964.3 | $ | 1,980.9 | $ | 175.3 | $ | — | $ | 2,156.2 | |||||||||||||||||||||||
| Capital Expenditures | $ | 247.3 | $ | 241.8 | $ | 489.1 | $ | 38.2 | $ | 187.0 | $ | 714.3 | |||||||||||||||||||||||
| Total Assets | $ | 13,024.0 | $ | 10,780.1 | $ | 23,804.1 | $ | 3,971.5 | $ | 2,047.7 | $ | 29,823.3 |
(1) The Recycling & Waste Subtotal represents the combined results of our Group 1 and Group 2 reportable segments.
Corporate functions include legal, tax, treasury, information technology, risk management, human resources, closed landfills, and other administrative functions. National Accounts revenue included in Corporate entities and other represents the portion of revenue generated from nationwide and regional contracts in markets outside our operating areas where the associated material handling is subcontracted to local operators. Revenue and overhead costs of Corporate entities and other are either specifically assigned or allocated on a rational and consistent basis among our reportable segments to calculate Adjusted EBITDA.
As presented in the tables below, Adjusted EBITDA reflects certain adjustments for US Ecology, Inc., acquisition, integration and deal costs, (income) losses from unconsolidated equity method investments, losses on extinguishment of debt, and restructuring expenses. This presentation is consistent with how our CODM reviews results of operations to make resource allocation decisions.
Intercompany revenue reflects transactions within and between segments that generally are made on a basis intended to reflect the market value of such services. Capital expenditures for Corporate entities and other primarily include vehicle inventory acquired but not yet assigned to operating locations and facilities.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A reconciliation of the Company's single measure of segment profitability (segment Adjusted EBITDA) to Income before income tax provision in the Consolidated Statements of Net Income is as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Group 1 Adjusted EBITDA | $ | 590.3 | $ | 527.1 | $ | 1,149.2 | $ | 1,016.6 | |||||||||||||||
| Group 2 Adjusted EBITDA | 555.2 | 499.2 | 1,074.2 | 964.3 | |||||||||||||||||||
| Group 3 Adjusted EBITDA | 112.3 | 89.8 | 198.9 | 175.3 | |||||||||||||||||||
| Total Adjusted EBITDA | 1,257.8 | 1,116.1 | 2,422.3 | 2,156.2 | |||||||||||||||||||
| Other income, net | (0.7) | 0.6 | (13.3) | (1.9) | |||||||||||||||||||
| Interest income | (1.6) | (1.6) | (3.1) | (3.0) | |||||||||||||||||||
| Interest expense | 128.3 | 124.4 | 267.6 | 251.1 | |||||||||||||||||||
| Depreciation, amortization and depletion | 413.0 | 358.3 | 812.2 | 717.0 | |||||||||||||||||||
| Accretion | 26.7 | 24.5 | 53.4 | 48.6 | |||||||||||||||||||
| Loss (income) from unconsolidated equity method investment | 33.8 | 3.6 | 42.5 | 2.7 | |||||||||||||||||||
| Loss on extinguishment of debt and other related costs | — | — | — | 0.2 | |||||||||||||||||||
| Restructuring charges | 5.7 | 15.5 | 11.5 | 21.0 | |||||||||||||||||||
| US Ecology, Inc. acquisition integration and deal costs | — | 10.6 | — | 18.2 | |||||||||||||||||||
| Gain on business divestitures and impairments, net | (1.4) | — | (1.4) | — | |||||||||||||||||||
| Income before income taxes | $ | 654.0 | $ | 580.2 | $ | 1,252.9 | $ | 1,102.3 |
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
13. REVENUE AND CREDIT LOSSES
Our operations primarily consist of providing environmental services. The following table disaggregates our revenue by service line for the three months ended June 30, 2024 and 2023 (in millions of dollars and as a percentage of revenue):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Collection: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | $ | 733.4 | 18.1 | % | $ | 700.2 | 18.8 | % | $ | 1,456.6 | 18.4 | % | $ | 1,385.3 | 18.9 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Small-container | 1,200.9 | 29.7 | 1,087.5 | 29.2 | 2,389.9 | 30.2 | 2,143.9 | 29.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Large-container | 770.2 | 19.0 | 737.5 | 19.8 | 1,503.0 | 19.0 | 1,439.4 | 19.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 18.3 | 0.5 | 17.8 | 0.5 | 36.1 | 0.5 | 32.9 | 0.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total collection | 2,722.8 | 67.3 | 2,543.0 | 68.3 | 5,385.6 | 68.1 | 5,001.5 | 68.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transfer | 457.7 | 435.2 | 877.1 | 836.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: intercompany | (249.5) | (237.9) | (486.1) | (465.2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transfer, net | 208.2 | 5.1 | 197.3 | 5.3 | 391.0 | 4.9 | 371.0 | 5.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Landfill | 761.2 | 740.6 | 1,466.0 | 1,429.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: intercompany | (321.0) | (309.6) | (621.4) | (605.7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Landfill, net | 440.2 | 10.9 | 431.0 | 11.6 | 844.6 | 10.7 | 823.6 | 11.3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Environmental solutions | 489.7 | 419.7 | 928.9 | 849.9 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: intercompany | (17.1) | (21.4) | (33.0) | (43.3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Environmental solutions, net | 472.6 | 11.7 | 398.3 | 10.7 | 895.9 | 11.3 | 806.6 | 11.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recycling processing and commodity sales | 107.5 | 2.7 | 79.5 | 2.1 | 203.0 | 2.6 | 150.1 | 2.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other non-core | 96.7 | 2.3 | 76.8 | 2.0 | 189.7 | 2.4 | 154.2 | 2.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other | 204.2 | 5.0 | 156.3 | 4.1 | 392.7 | 5.0 | 304.3 | 4.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 4,048.0 | 100.0 | % | $ | 3,725.9 | 100.0 | % | $ | 7,909.8 | 100.0 | % | $ | 7,307.0 | 100.0 | % |
Other non-core revenue consists primarily of revenue from National Accounts, which represents the portion of revenue generated from nationwide or regional contracts in markets outside our operating areas where the associated material handling is subcontracted to local operators. Consequently, substantially all of this revenue is offset with related subcontract costs, which are recorded in cost of operations.
See Note 12, Segment Reporting, for additional information regarding revenue by reportable segment.
Revenue Recognition
Our service obligations of a long-term nature, e.g., certain collection service contracts, are satisfied over time, and we recognize revenue based on the value provided to the customer during the period. The amount billed to the customer is based on variable elements such as the number of residential homes or businesses for which collection services are provided, the volume of material collected, treated, transported and disposed, and the nature of the material accepted. We do not disclose the value of unsatisfied performance obligations for these contracts as our right to consideration corresponds directly to the value provided to the customer for services completed to date and all future variable consideration is allocated to wholly unsatisfied performance obligations.
Additionally, certain elements of our long-term customer contracts are unknown upon entering into the contract, including the amount that will be billed in accordance with annual price escalation clauses, our fuel recovery fee program and commodity prices. The amount to be billed is often tied to changes in an underlying base index such as a consumer price index or a fuel or commodity index, and revenue can be recognized once the index is established for the period.
Environmental solutions revenue is primarily generated from the fees we charge for the collection, treatment, consolidation, disposal and recycling of hazardous and non-hazardous waste, field and industrial services, equipment rental, emergency response and standby services and in-plant services, such as transportation and logistics, including at our transfer, storage and disposal facilities (TSDF). Activity for this service line varies across markets and reflects the regulatory environment, pricing and disposal alternatives available in any given market. Revenue recognized is variable in nature and primarily based on the volume and type of waste accepted or processed during the period. For certain field and industrial services contracts, we have a right to consideration from our customers in an amount that corresponds directly with the value to the customer of the
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Company's performance completed to date. Therefore, we have applied the practical expedient to recognize revenue in the amount to which we have the right to invoice.
Deferred Revenue
The factors that impact the timing and amount of revenue recognized for each service line may vary based on the nature of the service performed. Generally, we recognize revenue at the time we perform a service. In the event that we bill for services in advance of performance, we recognize deferred revenue for the amount billed and subsequently recognize revenue at the time the service is provided. Depending on the nature of the contract, we may also generate revenue through the collection of fuel recovery fees and environmental fees which are designed to recover our internal costs of providing services to our customers.
Substantially all of the deferred revenue recognized as of December 31, 2023 was recognized as revenue during the six months ended June 30, 2024 when the service was performed.
Deferred Contract Costs
We incur certain upfront payments to acquire customer contracts which are recognized as other assets in our consolidated balance sheet, and we amortize the asset over the respective contract life. In addition, we recognize sales commissions that represent an incremental cost of the contract as other assets in our consolidated balance sheets, and we amortize the asset over the average life of the customer relationship. As of June 30, 2024 and December 31, 2023, we recognized $81.3 million and $82.5 million, respectively, of deferred contract costs and capitalized sales commissions. During the three and six months ended June 30, 2024, we amortized $4.0 million and $7.8 million, respectively, of capitalized sales commissions to selling, general and administrative expenses and we amortized $1.0 million and $2.1 million, respectively, of other deferred contract costs as a reduction of revenue. During the three and six months ended June 30, 2023, we amortized $3.7 million and $7.3 million, respectively, of capitalized sales commissions to selling, general and administrative expenses and we amortized $1.4 million and $2.7 million, respectively, of other deferred contract costs as a reduction of revenue.
Credit Losses
Accounts receivable represent receivables from customers for environmental services, including collection and processing of recyclable materials, collection, transfer, and disposal of solid waste, and other environmental solutions. Our receivables are recorded when billed or when the related revenue is earned and represent claims against third parties that will be settled in cash. The carrying value of our receivables, net of the allowance for doubtful accounts and customer credits, represents their estimated net realizable value.
We establish an allowance for doubtful accounts based on various factors including the age of receivables outstanding, historical trends, economic conditions and other information. We also review outstanding balances on an account-specific basis based on the credit risk of the customer. We determined that all of our accounts receivable share similar risk characteristics. We monitor our credit exposure on an ongoing basis and assess whether assets in the pool continue to display similar risk characteristics. We perform ongoing credit evaluations of our customers, but generally do not require collateral to support customer receivables.
The following table reflects the activity in our allowance for doubtful accounts for the six months ended June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| Balance at beginning of year | $ | 83.2 | $ | 51.9 | |||||||
| Additions charged to expense | 19.9 | 19.7 | |||||||||
| Accounts written-off | (20.2) | (5.3) | |||||||||
| Balance at end of period | $ | 82.9 | $ | 66.3 |
14. COMMITMENTS AND CONTINGENCIES
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 may result in fines, penalties or judgments against us, or settlements, which may impact earnings and cash flows for a particular period. Although we cannot predict the ultimate outcome of any legal matter with certainty, we do not believe the outcome of any of our pending legal proceedings will have a material adverse impact on our consolidated financial position, results of operations or cash flows.
REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 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 $15 million relating to our outstanding legal proceedings as of June 30, 2024. 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 can reasonably estimate a range of losses we may incur regarding such a matter, we record an accrual for the amount within the range that constitutes our best estimate. If we can 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 had used the high ends of such ranges, our aggregate potential liability would be approximately $9 million higher than the amount recorded as of June 30, 2024.
Multiemployer Pension Plans
We participate in multiemployer pension plans that generally provide retirement benefits to participants of contributing employers. We do not administer these plans.
Under current law regarding multiemployer pension plans, our withdrawal (which we consider from time to time) or the mass withdrawal from any under-funded multiemployer pension plan (each, a Withdrawal Event) could 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 regarding certain of the multiemployer pension plans in which we participate. We accrue for such events when losses become probable and reasonably estimable.
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
Restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Beginning-of-period and end-of-period cash, cash equivalents, restricted cash and restricted cash equivalents as presented in the statement of cash flows is reconciled as follows:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 490.6 | $ | 140.0 | $ | 181.6 | $ | 143.4 | ||||||||||||||||||
| Restricted cash and marketable securities | 178.0 | 163.6 | 149.6 | 127.6 | ||||||||||||||||||||||
| Less: restricted marketable securities | (76.8) | (76.1) | (58.2) | (56.7) | ||||||||||||||||||||||
| Cash, cash equivalents, restricted cash and restricted cash equivalents | $ | 591.8 | $ | 227.5 | $ | 273.0 | $ | 214.3 |
Our restricted cash and marketable securities includes amounts pledged to regulatory agencies and governmental entities as financial guarantees of our performance under certain collection, landfill and transfer station contracts and permits, and relating to our final capping, closure and post-closure obligations at our landfills as well as restricted cash and marketable securities related to our insurance obligations.
The following table summarizes our restricted cash and marketable securities:
| June 30, 2024 | December 31, 2023 | ||||||||||
| Capping, closure and post-closure obligations | $ | 42.8 | $ | 43.2 | |||||||
| Insurance | 135.2 | 120.4 | |||||||||
| Total restricted cash and marketable securities | $ | 178.0 | $ | 163.6 |
Off-Balance Sheet Arrangements
We have no off-balance sheet debt or similar obligations, other than short-term operating leases and 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.
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