Operator: Good afternoon and welcome to the First Quarter 2013 Call for Investors in Republic Services. Republic Services is traded on the New York Stock Exchange under the symbol RSG.
Your host for today's call are Don Slager, President and CEO; Glenn Culpepper, CFO; and Ed Lang, Senior Vice President and Treasurer. Today's call is being recorded and participants are on a listen-only mode. There will be a question-and-answer session following Republic's summary of quarterly earnings.
I would now like to turn the call over to Mr. Lang. Good afternoon, Mr. Lang.
Ed Lang - SVP, Treasury and Risk Management: Thank you, Brian. Welcome, and good afternoon, and thank you for joining us. This is Ed Lang and I would like to welcome everyone to Republic Services' first quarter 2013 conference call. Don Slager, our CEO and Glenn Culpepper, our CFO, are joining me as we discuss first quarter 2013 performance.
Before we get started, I would like to take a moment to remind everyone that some of the information that we discuss on today's call contains forward-looking statements, which involve risks and uncertainties and maybe materially different from actual results. Our SEC filings discuss factors that would cause actual results to differ materially from expectations.
The material that we discuss today is time-sensitive. If in the future you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is April 25, 2013. Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Republic Services is strictly prohibited.
I want to point out that our SEC filings, our earnings press release, which includes GAAP reconciliation tables, and a discussion of business activities, along with the recording of this call, are all available on Republic's website, at republicservices.com. And finally, I want to remind you that Republic's management team routinely participates in investor conferences. When presentations are scheduled, the dates and times are posted on our website along with instructions for listening to the live webcast of the event.
With that, I would like to turn the call over to Don.
Don Slager - President and CEO: Thanks Ed. Good afternoon, everyone, and thank you for joining us as we discuss Republic Services' first quarter 2013 performance. I'm pleased with our first quarter performance, which reflects an overall improvement in business conditions. We saw sequential increases in core pricing, volume, and margins, which drove our strong Q1 results. We continue to profitably grow our core business as evidenced by year-over-year increases in revenue, earnings and free cash flow. Some of the financial and operational highlights during the quarter include; adjusted earnings per share of $0.46 – this represents an increase of $0.08 or approximately 21% versus the prior year; adjusted free cash flow of $213 million, which was in line with our expectations; adjusted EBITDA margin expanded 40 basis points, reflecting the benefit of our field and corporate office reorganization completed in the fourth quarter 2012. Q1 core price was 1.2%. This represents the third straight quarter of core price improvement. Net price to customer, defined as price increases less rollbacks was 3.2% in the first quarter. Based on Q1 industry results reported to-date, our net price to customer performance is the highest in the industry.
Q1 volumes declined 50 basis points. This represents a sequential improvement of 60 basis points after adjusting for the change in workdays. Consistent with our guidance, we expect to see positive volume performance in the second half of 2013.
We continue to see growth in construction and demolition volumes with temporary roll-off halts up 2.4% over the prior year. And if you remember, 2012 had a very mild winter, which creates a tough comp for this portion of our business.
We continue to see growth in our recycling business. Q1 recycling facility tons increased approximately 8% over the prior year. Additionally, we completed an upgrade to a single-stream recycling facility in St. Louis, which will add about 70,000 annual recycling tons into our system.
We completed seven acquisitions for approximately $12 million. These transactions were consistent with our strategy of purchasing tuck-in acquisitions in existing markets. This level of investment was expected in the first quarter, and we anticipate completing our goal of spending $100 million by the end of the year.
We returned approximately $161 million to stockholders through share repurchase and dividends. We repurchased 2.4 million shares for $76 million, which was consistent with our plan. We have $248 million remaining on our share repurchase authorization which we expect to complete in 2013.
In summary, our strong performance in the first quarter was in line with our expectations and keeps us on track to achieve the full year guidance we provided in February. Consistent with prior practice, we will update our full year guidance on our Q2 earnings call in July.
Glenn and Ed will now discuss our financial performance. Glenn?
Glenn Culpepper - EVP and CFO: Thanks Don. First quarter 2013 revenue was approximately $2 billion and reflects the following three components of internal growth; pricing, volume and recycled commodities.
First on pricing. We had core price growth of 1.2% with positive price in all lines of business. Core price increased 10 basis points sequentially from 1.1% in the fourth quarter of 2012. This level of pricing was in line with our expectations for the first quarter and we remain comfortable with our full year guidance of 1 to 1.5%. In addition, fuel recovery fees increased 0.3%. The average price per gallon of diesel increased to $4.03 in the quarter from $3.97 in the prior year, an increase of 2%.
Second, first quarter volumes decreased 5.5% year-over-year excluding a 50 basis point decline due to one less workday. The collection business was positive 0.4%, including growth in commercial and industrial volumes. Growth in the industrial line of business was driven by temporary halts, which as Don indicated earlier, were up 2.4% over the prior year. The growth in collection was offset by a decline in municipal solid waste landfill volumes of approximately 4%. Most of the decline in MSW relates to volumes lost in 2012 that have not yet anniversaried and the impact of weather.
Third, a decrease in commodity sales resulted in a 0.2% decrease in revenue. Commodity prices decreased approximately 9% to an average price of $112 per ton in the first quarter from $123 per ton in the prior year. This represents the average price for all commodity types for all regions. Q1 recycling facility commodity volume of 539,000 tons was up 8% from the prior year. Our 2013 guidance was based on an average commodity price of $112 per ton. For reference purposes, a $10 per ton change in commodity values equals approximately $0.03 of full year EPS, which includes the impact on our recycling facility and collection businesses.
Now, I will discuss year-over-year margin. First quarter 2013 adjusted EBITDA margin was 28.5% compared to 28.1% in the prior year, an improvement of 40 basis points.
Some of the more significant items that comprised the margin change include; first, labor. The 40 basis point increase in expense primarily relates to revenue mix. There was a decline in landfill and commodity revenues which have little to no associated labor costs. Within the collection lines of business, direct labor cost as a percentage of revenue remained relatively flat.
Second; maintenance. The 30 basis point increase in expense primarily relates to the change in revenue mix that I just discussed. Sequentially, margin performance improved 20 basis points as we continue to anniversary the implementation cost associated with our maintenance initiative.
Third; fuel. The 20 basis point improvement primarily relates to a higher percentage of natural gas trucks in our fleet. Currently, about 9% of our fleet runs on natural gas. This represents an increase in our natural gas fleet of approximately 50% when compared to the prior year. We will continue to replace diesel trucks with the natural gas trucks where appropriate and as part of our normal truck replacement cycle.
As I mentioned earlier, the average price per gallon of diesel increased to $4.03 in the first quarter of 2013 from $3.97 in the prior year, an increase of approximately 2%. The current price for diesel fuel is $3.89 per gallon. Our 2013 guidance is based on the average diesel price of $4.02 per gallon. For reference purposes, a $0.20 change in diesel fuel per gallon is about $0.01 of full year EPS, which includes the impact of our fuel recovery fees and fuel hedges.
Fourth, landfill operating costs. The 80 basis point increase in expense relates primarily to a favorable adjustment recorded in 2012. Additionally, there was an increase in leachate expense in the current year in certain landfills.
Fifth, risk management. The 20 basis point improvement relates to reductions in premiums charged by third-party carriers as well as an improvement in our claims experienced.
Next, cost of goods sold. The 10 basis point improvement relates to a reduction in rebates paid for volumes delivered to our recycling facilities. Cost of goods sold decreased to an average of $32 per ton from $38 in the prior year.
Finally, SG&A. SG&A was 10.3% of revenue, which is an improvement of 90 basis points compared to the prior year. This improvement primarily relates to cost savings from the reorganization of our field operations and corporate office in the fourth quarter of 2012 and lower levels of bad debt expense. On an annual run rate SG&A is approximately 10% of revenue.
DD&A as a percentage of revenue was 11.4% in the first quarter versus 11.8% in the prior year. This improvement relates to an unfavorable landfill liability adjustment that was recorded in the prior year. DD&A is higher than capital expenditures as a percentage of revenue due to the amortization of intangibles.
Ed will now discuss interest expense, taxes and free cash flow.
Ed Lang - SVP, Treasury and Risk Management: Thanks Glenn. First quarter 2013 interest expense was $89 million, which included $12 million of non-cash amortization. First quarter adjusted EPS had an effective tax rate of 33.4%, which included a benefit from favorably settling open tax years with the IRS. This benefit was included in our guidance which we provided in February. We still expect a full year effective tax rate of approximately 38%, and therefore, our effective tax rate will be approximately 39.5% for the remainder of the year.
I will now discuss free cash flow. Adjusted free cash flow was $213 million and in line with our expectations. Adjusted free cash flow included capital expenditures of $214 million or approximately one quarter of our projected full year spend. Cash flow can vary quarter-to-quarter based on the timing of working capital.
Now I'll discuss the balance sheet. At March 31, our accounts receivable balance was $822 million and our days sales outstanding was 37 days, or 23 days net of deferred revenue. Reported debt was approximately $7 billion at March 31 and excess availability under our bank facility was approximately $1.6 billion.
I will now turn the call back to Don.
Don Slager - President and CEO: Thanks Ed. To conclude, our first quarter results put us right where we thought we would be. I'm proud that the Republic team continued to execute our strategy and our strong performance reflects our hard work. We've built a strong vertically integrated national platform and remain well positioned to take advantage of improving business conditions. We will continue to focus on generating consistent earnings and cash flow growth and remain committed to an efficient cash utilization strategy that increases returns to our stockholders.
At this time, operator, I'd like to open the call to questions.
Operator: Hamzah Mazari, Credit Suisse.
Hamzah Mazari - Credit Suisse: The first question is just on pricing. Don, maybe if you could talk about any change to how you are approaching pricing this year. One of your competitors is obviously out with a more aggressive pricing strategy, and your pricing strategy – maybe if you could talk about how you're approaching pricing this year relative to last year and the year before given that volumes appear to be more stable?
Don Slager - President and CEO: Well, I mean we're going to adjust or approach pricing the same way we always have, Hamzah, and we've got a good system in place, a good central control over our pricing structure. We've talked a lot about our ratable pricing method and how we oversee pricing with our post-collection side of the business. I have said very consistently that I think as the economy returns, as some organic growth comes back into the business that the pricing dynamics will improve, I think consumer sentiment improves and sensitivity gets better. I think all of that paves the way for stronger pricing.
Hamzah Mazari - Credit Suisse: And then just on salaries and allowance for doubtful accounts, that went down and you mentioned the restructuring. Maybe if you could talk about how sustainable that is going forward and what you have baked into your current guidance?
Don Slager - President and CEO: We've said very clearly. We think our SG&A is going to be right at around 10% and that's been a pretty consistent number for us. Obviously, the more growth we had over time, we can maybe get a little bit leverage there. But 10% is our number for the year. And as far as sustainability goes, the actions we took in the restructuring are very sustainable and the organization is functioning very well as a result of the restructuring.
Operator: Al Kaschalk, Wedbush Securities.
Al Kaschalk - Wedbush Securities: Don, this is sort of a broader question and I'll let you decide how to explain it or answer it. But if I look just at the top line and I look at cost of goods sold, growth rate in sales is below the cost, the quick cost of doing business. And you're not alone in that that several other companies have done that, but specifically, are there things that you're seeing that we should start to expect that sort of relationship to flip around going forward?
Don Slager - President and CEO: Yeah, I think, first of all, we talk about the negative growth or the negative volume in the first half. Remember, we've got some anniversarying of some key contracts that were lost or large contracts were lost last year. So, we still believe that we're going to be positive growth in the second half which sort of nets us to sort of flattish by the end of the year. But we think the business is growing. We talk about sequential improvement in pricing now for several quarters. We've got a pretty positive story on the collections side of the business and we've got – our landfill business is negative; but again, that's coming from a couple of large contracts, maybe a little bit of weather that we're facing. Overall, we think the trends, the current trends are positive. So, sequential pricing improvement is a good thing. As I just answered Hamzah's question, as some organic growth comes back into the business, we think those dynamics around pricing and our ability to improve or recover, if you will, the inflationary cost get better as we go through time.
Ed Lang - SVP, Treasury and Risk Management: Al, this is Ed. Also keep in mind as you start to see positive volume growth, that does lead to better density, better asset utilization, which means you're simply getting better return on the existing asset base. And as Don mentioned, that's something we've been talking about quite a while due to the late cycle nature of the business that as we start to see the volume improvement, we get the better asset utilization, which will lead to expanding margins and a less competitive pricing environment as industry continues to grow.
Al Kaschalk - Wedbush Securities: Then my follow-up would be, we've talked a little bit about this previously, but just to be clear. The number of strikes or labor issues that have been popping up in the press, I think you called out in the reconciliation some of that, maybe it would be a good idea just to clarify for folks sort of where you are at in terms of the frequency of these that are showing in the press, I'd like to refer to it as sort of drive by strikes, because they are not very long in duration, but they're certainly a headwind.
Don Slager - President and CEO: Right, sure. Well, the issue we're facing right now is primarily related to the central states pension issue. So we've got a portion of our business, a number of our drivers that are covered by the Central State's pension which is headed for insolvency. There is no way mathematically for that fund to save itself. And so we are in the process of negotiating our way out of the Central State's pension. We have every intention of getting out of the pension. We have a very strong feeling that we want all of our employees to be covered by a high quality retirement vehicle, and being part of a pension plan that's going to be insolvent in the future; this is not that. So, we're working hard for our employees to get them into something that makes sense for them. We're about halfway through the number of CBAs that are affected by central states and we're working through the second half. So, we hope to be through that by the end of the year. Having said all that, we historically have had a very good relationship, a very constructive relationship with the local unions and their leadership. We intend to continue to have that and we continue to (indiscernible) good faith to get through this
Operator: Corey Greendale, First Analysis.
Corey Greendale - First Analysis: I think Don you gave a statistic; net price net of rollback, so you said you're leading the industry, and that I'm not sure I exactly know how you're calculating that, but if you are leading the industry, I think it was about a year ago you were talking about fiercely defending your business, so it seems like kind of things have shifted from now and from then. To what do you attribute that kind of industry-leading metric?
Don Slager - President and CEO: Well, again, price to customer, if you will, really measures the pricing activity of your business. So, what do you think price elasticity is in a market and how much price increase do you think you can capture in the marketplace. So that metric of pricing to customer less rollbacks kind of measures that activity. There's a lot of noise in the market about yield versus – so I think all the companies sort of measure price differently. So, we just tried to bring a clear view to that so that you can compare pricing effectiveness of the different organizations. So, we've introduced this price to customer metric to help me clear that up. So, again, we think – again, our pricing activity is pretty consistent. We cannot completely make up for inflationary increases just through cost controls and productivity gains. So, we have to have price increasing to offset that. We've never gone price negative even through the darkest times of recent economic downturn and we've said that as the economy gets better, as organic growth improves, as other competitors have an opportunity to grow their business organically, we think competition regulates of moderates a little bit. It's always been a competitive business. It always will be a competitive business. We think it just softens a little bit and customer sentiments, as I said before, just improves. So, we think a lot of that is happening. And we're going to continue doing we have to because we cannot simply, again, offset our cost inflation through our productivity gains. So, pricing has to happen in our Company and I think in the industry to continue hold up margins and grow the business profitably.
Corey Greendale - First Analysis: On the productivity gains side, Don, at one time you talked about kind of a parking lot of opportunities to improve efficiencies after some of the big ticket items, after you have Republic and Allied merger. Could you just give us visibility on kind of where you're at, how big is that parking lot now and is there anything kind of meaningfully working on that we could be thinking near term?
Don Slager - President and CEO: That's a good question. Corey, we're working on the same things we were working on last year. Again, we've got 30,000 employees, 15,000 trucks, 800 dots on the map, right? So, when we take on some kind of a change initiative across the enterprise, it's a pretty big deal and change of management is a pretty tough thing for people. So things like the One Fleet initiative, we will be halfway through that by the end of this year, we will have affected half of our fleet. So we've got another couple of years to go. Again, when we get into next year, we will start seeing more benefits accrue from the One Fleet initiative. We will start to offset some of the costs of implementing One Fleet. One Fleet is going to drive better productivity, better employee engagement, ultimately I think better customer experience. So we will start to see the benefits from that and the benefits from that in '14. And then we will build as we complete the initiative. We've talked about CNG. We're continuing to spend, I think this year 40% plus of our fleet spend is on CNG trucks. We've talked about building our fleet up to maybe 25% or 30% CNG over the future years. That's going to be again a multiyear initiative. So, we've got a number of those things that were in the parking lot at the time of the merger that we've undertaken that they are multiyear initiatives. So, none of these things happen fast. When we get through these couple of big items, then we will be talking about what we conquer next. But we're going to do these things really well. We're going to do them across the enterprise and we're going to do them with results that we (cap).
Operator: Adam Thalhimer, BB&T Capital Mortgage.
Adam Thalhimer - BB&T Capital Mortgage: In terms of the C&D volumes, you said they were up a little over 2% year-over-year in the quarter and that maybe weather held that growth back a little bit, I mean as this housing recovery matures what kind of growth rates do you think you might see in that line of business?
Ed Lang - SVP, Treasury and Risk Management: You kind of look at what we saw starting the third quarter of last year, and Q3 of last year we saw the temporary roll-off business grew by 3.8% and it was 5.7% in Q4, 2.4% in Q1, and as we mentioned in the comments; two things, one, we had some real winter weather this year, and I think when you look at our business regionally, we did see strong performance in that temporary roll-off business on the Western states; Texas, in the Southeastern U.S., which obviously are the geographic locations that were less impacted by the severe winter weather that we saw in the Midwest and Mid-Atlantic and the Northeast. So, we don't really provide detailed guidance as to percentage quarterly gain, but we believe it is tracking in the right direction. And then the other thing is, just as a comparison issue, if you look at Q1 of '12, it was an exceptionally warm winter. And I think if you go back and you look at the industry's performance in Q1 of '12, you saw a fairly, let's call it, elevated levels of C&D activity, which actually turned out to be just a pull-forward of the normal Q2 activity in 2012. So, the fact that we did have that 2.4% given the weather conditions in the Midwest and the Eastern states, plus the tough comp, we think the 2.4% is good to strong performance, and we expect the C&D business to continue to grow with the relative economies where we do business, and obviously, you look at all the housing stats and the Architects Index, all those types of leading indicators are pointing in the right direction.
Don Slager - President and CEO: Yeah, three quarters in a row and I think that's a real trend and we'll build on that from here.
Adam Thalhimer - BB&T Capital Mortgage: What does it feel like on the ground? I mean, is there less capacity in that business? Are you getting more calls for containers? I mean, does it feel more active to you?
Don Slager - President and CEO: Yeah, it's more active. The 2.4%, those are measured in halves, right. So, those are actual halves being serviced by our fleets in the various markets that I talked about. A little more active in the West, Southeast, Florida specifically; a little less active in some of the markets where we have winter and as we get into May and June that's where we start to see seasonality in the business and that's going to be telltale sign for us to see how the year comes in.
Adam Thalhimer - BB&T Capital Mortgage: Then just as a follow-up here, the expectation that volumes turn positive in the back half of the year, is that all easier comps or are there some leading indicators in the business that would support that?
Don Slager - President and CEO: That's mostly easier comps. We anniversary a couple of big contracts that we lost that we had a talk about a year ago and we haven't had any continued contract loss of that size. So, we are going to anniversary those biggies and then we're going to get into a better comp in the last halve of the year. But then as Ed said, these other trends are improving. So, we are pretty confident in the guidance we've given you.
Operator: Michael Hoffman, Wunderlich.
Michael Hoffman - Wunderlich: Can we talk a little bit about maybe putting a little direction around the productivity? I get the one fleet to CNG conversion probably could be added to that as automation. If you thought about natural inflation in the business is sort of 1.5% to 2% and we're living in this economy; whatever this is, this is the economy for a while. What do you think you can do in productivity to help offset that natural inflation, plus sort of that continually turning the screw on cost? What's the basis point kind of range to think about so that when we think about your pricing at 1.5%, how that sort of plays out?
Don Slager - President and CEO: Yeah, I think historically, we've said it's kind of a 20 basis points to 30 basis points, right, a year. So, less than 1% certainly, right? So, we've been at this a long time, Michael. We're pretty productive and so we're working at the harder things now. Again, CNG makes sense to us because we're replacing trucks that are going to be otherwise disposed of. So, we're pacing ourselves there. The One Fleet; we're in the process now, that's still costing us a little bit of money and we start to come over the top of the hill on that next year. Things like single-operator vehicles, the automation, we continue to reduce our workforce in that residential system, become more efficient with fewer accidents. All that stuff helps productivity. But we're pretty good at what we do, and it's not like there's a lot of low-hanging fruit out there. So, if we get back to, again, 1.5% or 2% pricing and we have 1.5% inflation less, call it 20 basis points or 30 basis points of productivity, we can start to see a little bit of margin expansion again as it relates to that pricing environment.
Michael Hoffman - Wunderlich: And then on the household formation, sort of the construction, I mean we all love the C&D, but the real play is, not only they build it but they sell it, and you get a residential contract, and if they build enough of them and sell enough of them, maybe somebody builds a restaurant or a strip mall. So, can you frame two things here? One, what are you seeing as far as that starting? Is there a light at the end of that tunnel? What's the sort of thoughts about that? And I think you got to $1.2 million starts a year and lapped ourselves at a $1.2 million. What does that mean in volume in your mind?
Don Slager - President and CEO: We're talking about 2013. So, I think we'd rather kind of stick with the guidance that we're talking about for this year. Again, as you know Michael, we're late-cycle in this. So, it's too early I think to tell or talk about business formation; we're not really seeing a lot there yet. So, we're on the front-end of this thing, starting to see more temporary roll-off halts. We'll see more construction. You hear the homebuilders talking about what they're going to do. So, we'll make those halts, to your point, and we'll halt that house every month for the reoccurring revenue. We'll take our part of the – our share of new organic growth of business information. That's our bread and butter. So, I think after a very sort of long dark period in the industry, we've seen a pretty tough volume situation and a pretty low pricing environment. I think the trends are that we're coming out of this thing. We've got some real trends sequentially to be happy with and celebrate, and we've got to pace ourselves. I don't think this is going to come back quickly. We just want it to come back steadily. And I think that's what's going to happen.
Operator: Alex Harfouche, Goldman Sachs.
Alex Harfouche - Goldman Sachs: A couple of questions. First, can you talk about how the business is trending so far in April, and any notable tidbits to highlight for us thus far in April?
Don Slager - President and CEO: Yeah, Alex, you know, we kind of are trying to stick to Q1 and talk about what we've done in the quarter and again, be consistent with our practice of reiterating our guidance for the full year. We think as I just got done saying with Michael, the trends are good. We think they are sustainable and we're on track to meet our guidance and have a good year. So, I think you can read between all that and kind of come to your own conclusion.
Alex Harfouche - Goldman Sachs: Then on the commodity side, do you have any incremental insight on OCC pricing, recycled paper pricing and thoughts on the Green Fence initiative and the implications from that on the commodity price environment?
Ed Lang - SVP, Treasury and Risk Management: As far as operation Green Fence, I think what we've tried to do there is work with our various buyers to that they can conduct inspections in the U.S. that doesn't get held up at port, but there is a bit of a bottleneck. It's hard to forecast as to exactly how that will impact OCC pricing during the course of the full year, but I would tell you we're doing whatever we can to, let's call it, expedite the shipment of the materials which we're sending to the export markets. If you just look at the blended OCC price during the first quarter, it was trending up slightly month-to-month averaged about $122 for the full quarter. So, I think it's a good pricing environment for OCC, but we are not really at type of levels we saw in 2010 or for the first few quarters of 2011. But it's an improving market, we'd just continue to work with our buyers to minimize some of the delays with operation Green Fence.
Alex Harfouche - Goldman Sachs: And just one more quick question, did you guys tell us what your CNG volume to landfill was in the quarter – what that change was?
Ed Lang - SVP, Treasury and Risk Management: It was down slightly in the year-over-year kind of mid-single-digits. And the reason for the variance was we had two significant C&D landfill jobs in the first quarter of 2012 that obviously didn't occur. So, really most of the negative variance was the comp related to those two jobs.
Operator: Stewart Scharf, S&P Capital IQ.
Stewart Scharf - S&P Capital IQ: Can you talk a little about where you are with shale waste?
Don Slager - President and CEO: Well, sure. We're in the solid waste landfill business and so we do accept material E&P drilling mud, et cetera, as part of our special waste stream in the landfills that are situated in and around where that drilling activity is occurring. And our E&P business, if you will, is really related just to that activity alone. We don't have other site services along that business like other companies in our space have. So, on a year-over-year comp basis, that business is relatively flat for us; consistent but flat.
Stewart Scharf - S&P Capital IQ: And now regarding your guidance, you kept it same and first quarter was strong; you're looking for well-controlled costs and sequential growth and pick up in volume. Are you being just a little conservative at this point or do you think that you might be closer to the high end or…?
Don Slager - President and CEO: No, just as I said, we're reiterating our guidance and its one quarter in. Our Q2s and Q3 are the strongest quarters of the year. So, as I said previously, as we start to see what seasonality does for us in the months of May and June, we'll be able to tell a little bit more in July. But we feel good about the trends; we feel really good about the conditions we're seeing in the market, we feel good what our people are doing to move the business forward, and we'll talk more about where we think we're going to be at the end of June (up to in) July.
Operator: Barbara Noverini, Morningstar.
Barbara Noverini - Morningstar: I just wanted to ask about the recycling rebate COGS coming down. Is this mainly a function of the commodity values themselves being lower recently, or have you also been able to negotiate more favorable turns with your customers as contracts come up for renewal? I'd assume that as you've grown recycling capability over time, you've also learned about the most optimal way to structure these arrangements.
Don Slager - President and CEO: Yeah, it's mostly just what you said. It's the rates adjusting. As we get size, as we get scale, we get a little better at running the business, but we already have some pretty good contractual arrangements with selling the material to the right end markets. We've got a pretty good core competency hearing and doing that. So, it's just really mostly related to just the rates going up and down.
Operator: Jeff Osborne, Stifel.
Jeff Osborne - Stifel Nicolaus: A couple of questions from my end. I was just wondering, in the past call or two you've talked about the potential privatization of municipal landfills and taking those over just given the challenging municipal backdrop. Was that a part of any of the M&A you did this quarter or something that's still on the potential radar for you folks?
Don Slager - President and CEO: It's on our radar. We are focusing on it. We recently announced the Flint, Michigan contract that we privatized or that the city chose to outsource. So we announced that earlier in the year, I think, in February. So, we are going to continue to look at that. We do believe that again, (general fund) in many cities is under duress and the same situation that's creating surprising pressure for us is also creating some opportunity for us to talk to cities about the possibility and opportunity frankly to outsource that service to us. So, we're going to continue to focus on it. As I've said in the past, we've got a pipeline of opportunity there, but these are very long sales cycles and they are very complex sales and they are very sort of political in nature. So, it takes a while to get that done.
Jeff Osborne - Stifel Nicolaus: Then two other quick ones here. Is there kind of a magic price of natural gas in your mind where you would slow down or stop altogether your CNG conversion or are you just committed to it despite some of the higher prices that we've seen in recent months.
Don Slager - President and CEO: Well, I'd let Ed talk a little bit more about the specifics. We would – we believe that right now it's a very economical alternative for us. It will be for the environment, but to stop altogether that would be a pretty dramatic change in I think the pricing situation there. So, Ed, why don't you give some color on that?
Ed Lang - SVP, Treasury and Risk Management: Sure. If you kind of look at the – what we're paying for natural gas versus diesel today and looking at our actual performance in the first quarter. What we're benefiting today on the CNG conversion is a gallon cost differential of $2.13 and that benefit of $2.13 cost savings does not include the $0.50 per gallon tax credit which we'll receive in 2013. Now, that was a one item as far as the tax credit. So, obviously, we look at the separately and don't include it in the net cost differential between diesel and CNG.
Jeff Osborne - Stifel Nicolaus: And then the last question is bigger picture, with the disappointment the industry has had over the past two to three quarters on the pricing front, and with volumes starting to improve, is churn getting better or worse, how do we think about that, for maybe either yourselves or your perception of the industry, it would be helpful?
Don Slager - President and CEO: Yeah, well a couple of things, just definitional, right. When we talk about churn, we're talking about the difference between what we sell a new unit of service at versus what we lose, when we lose a customer, what is that price per unit of service. So that churn, that difference in price is pretty consistent, pretty flat, okay. If we talk about (faction), that's a separate matter. That's how much business we lose and that's pretty flat, and that's about 7%. So, about 7% of our business we lose on an annual basis. A little more than half of that is competitive and some of that is structural, call it bankruptcies. It's been a pretty consistent number for us for several years. So, we think overall the business is stable. But as I said before, it's always been a competitive business, it always will be. It's a very local business in that way, but as organic growth improves, we think all competitors just feel better about their business and become sort of less or more rational, if you will, in their practices and we think customers frankly just are less sensitive to an extra percent of price. So we think just the overall improving economy is going to drive that for us.
Operator: Joe Box, KeyBanc Capital Markets.
Joe Box - KeyBanc Capital Markets: Just a question on the CapEx front. I know you said earlier that it came in line with expectations. But with it being down year-over-year, can you maybe just give us a flavor of where you cut back and how we should think about it trending over the next couple of quarters?
Don Slager - President and CEO: Yeah, we really haven't cut back. I mean the only thing I think that is different this year over last year is we've reduced our overall spending in recycling development, and that is because that's a little bit lumpy. We did some bigger projects last year in total than we did this year. So we're doing the same sort of number of projects, last years were bigger. And we said we're going to spend – we're going to do three to five markets per year as far as our infrastructure build-out or enhancements in recycling. We've stayed true to that. We're going to continue to do it, because as you can see or as you can understand, it's a little bit lumpy. As far as truck spending, it's very consistent. We've got a very young fleet. We replace very consistent number of trucks every year. About 30% of our total CapEx goes to cell development. We've got to dig those landfills to fill them up. And so that's pretty consistent. We manage our CapEx generally in line with about 10% of our revenues and we've historically done that as consistently as far back as I can remember. So, I don't see that really changing much.
Ed Lang - SVP, Treasury and Risk Management: And Joe, just to reiterate the guidance, the net CapEx, which is gross CapEx of $860 million less $25 million in proceeds from asset sales, that number is $835 million. The guidance for net CapEx for the full year is $835 million and we did spend $214 million in Q1. So, I would say, we're just simply tracking right on our plan with almost exactly 25% of the spend occurring in Q1.
Don Slager - President and CEO: Yeah, and Joe, sometimes there are timing differences with when we get the trucks in or (indiscernible) depending on when contract start. So that ebbs and flows a little bit, but we're really right where we thought we'd be.
Joe Box - KeyBanc Capital Markets: And then Don, you mentioned earlier that you guys are out doing all you can to basically drive pricing. One of your peers is out basically looking to introduce a regulation fee and some other fees out there to maintain the price cost breakdown. Can you just give us some historical context; when a waste player comes out and introduces a one-time true-up fee, is that something that typically other peers come out and follow suit with or is it more of a one-off thing?
Don Slager - President and CEO: Yeah, here's what I would say, Joe, we are constantly reviewing our costs and constantly reviewing the market and looking to recover cost increases through pricing. So, we've recently reviewed our fuel recovery fee and made sure that that made sense for the Company and was fair to our customers. We think it's the right amount for us today. We, from time to time, look at our environmental fees and look at what it takes to run these landfills. A number years ago, the EPA passed some legislation that drove our air quality testing cost above $3 million and we (can) chose to pass it along to our customers through an environmental fee. So, that's how we look at our business. This is a very capital-intensive business. These landfills are very expensive to own and to operate and they are long-life assets with lots of liability, and we've always got to make sure that we're getting the right price for those assets and we look at that on an ongoing basis, really year-in and year-out.
Joe Box - KeyBanc Capital Markets: Just a housekeeping item for you then. If you look at the repurchase versus the option issuance this quarter, it looks like it was about a push. Should we think about the buyback having more of an effect in the share count in the coming quarters? How should we think about that?
Ed Lang - SVP, Treasury and Risk Management: Obviously, Joe, we have our plan for share repurchase this year. Coming into the year, we had about $225 million. Obviously, we used probably about a quarter of that in Q1. So, again, we're tracking right on plan with the use of cash for repurchase. When you talk about option dilution, that's a little bit hard to forecast and so we really don't have that in the number. There was some option exercise in Q1 that did impact the share count which we did offset with share repurchase, but I don't think you can really forecast option exercise during the course of the year.
Joe Box - KeyBanc Capital Markets: I mean, no commentary on how that could trend directionally?
Ed Lang - SVP, Treasury and Risk Management: No, because again, we don't really forecast. That's an individual decision as to when to do that.
Operator: Thank you. That's all the time we do have for questions today. I will now turn the call back to Mr. Slager for his closing remarks.
Don Slager - President and CEO: Thank you, operator. I would like to thank all Republic employees for their hard work, commitment and dedication to operational excellence in creating the Republic way. Thank you for spending time with us today and have a good evening.
Operator: Okay. Thank you. That concludes the Republic Services conference call for today. Thank you for participating. You may disconnect at this time.