Good morning and welcome to the Second Quarter 2009 Conference Call for investors in Republic Services. Republic Services is traded on the New York Stock Exchange under the symbol RSG. Your host this morning is Republic Chairman and CEO, Mr. Jim O'Connor. Today's call is being recorded, and all participants are in a listen-only mode. There will be a question-and-answer session following Republic's summary of quarterly earnings. (Operator Instructions). At this time, it is my pleasure to turn the call over to Mr. O'Connor. Good morning, Mr. O'Connor.

Good morning, Julie and thank you, and good morning and thank you to all of you for joining us today. This is Jim O'Connor, and I would like to welcome everyone to Republic Services second quarter conference call. Don Slater, our President and Chief Operating Officer; Tod Holmes, our Chief Financial Officer and Ed Lang, our Treasurer are joining me, as we discuss our second quarter performance. I'd like to take a moment to remind everyone that some of the information that we discussed 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 could cause actual results to differ materially from expectations. Additionally, the material that we discuss today is time-sensitive. If in the future, you listen to a rebroadcast or a recording of this conference call, you should be sensitive to the date of the original call, which is July 30, 2009. Please note that this call is the property of Republic Services Incorporated. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited. I am pleased to report that we'll be raising our 2009 financial guidance, as a result of our pricing discipline and our ability to adjust our cost structure. In addition, we are significantly ahead of plan in achieving merger synergies. Financial highlights for the second quarter are revenue of $2.1 billion, net income of $226 million or $0.59 of earnings per share. Our adjusted EPS was $0.39. The adjustment is primarily related to the divestiture gains, adjusted EBITDA margins of 30.7%. This outstanding performance highlights the ability of our field organization to maintain pricing discipline, and implement cost controls, while working through the integration process. Average price in…

Thanks Jim. As Jim indicated second quarter revenue for 2009, as reported, rose almost 150% to $2.1 billion, from $828 million last year. And again this increase of about $1.25 billion relates to the merger with Allied. Since we are measuring performance of the operations on a combined company basis, the remainder of my comments assume that the company's merged as of January 1, 2008. The prior year combined company financial data, referenced in my comments can also be found on our website. Now on a combine company basis, there is a decline in total internal growth of about 12.5%, and I will give you the components. First, the core price growth of 3.4%. We continue to see core pricing improvements in all lines of business, including collection at about 3.9%, and landfill pricing of about 3%. Within the collection business, industrial pricing of 3.2% was less than other lines of business, and has made up approximately of 70% permanent work and 30% temporary work. Price increase, on temporary work, was less than the industrial average. In fact, it was fairly flat. Now let me talk a little bit about our internal growth methodology. Beginning Q1, 2009, Republic embraced the methodology used by Allied in prior years. Under this approach, price increases are calculated using the average price per unit method. Changes in commodity revenues and fuel recovery fees are calculated separately, and are not included in our reported core price. However, when expressing price increases as a percentage, price dollars are guide by total prior period revenue which includes commodity revenues and fuel and recovery fees. This has the impact of lowering the calculated effect of price increase percentage to our existing customer base. Because we believe consistency is important, we're consistency is important we're continuing to report price…

Thanks, Tod. Due to pricing discipline, cost control and integration synergies, we are increasing our 2009 financial guidance. We are increasing our free cash flow guidance for 2009 to a range of 700 million to 725 million before integration cost. The previous guidance for free cash flow was $650 million. We're raising our adjusted earnings per share guidance to a range of $1.43 to $1.45 per share, before integration costs. Previous guidance range was $1.30 to $1.35 per share. We expect price growth to average 3.2% to 3.5%, for 2009. This pricing level reflects the impact of a lower CPI rate on municipal contract adjustments. Our current pricing strategy will continue to deliver improvement in margin, and return on invested capital. Full year volume decline is expected to be in the area of 8.5% to 9%, reflecting the ongoing weakness in the economy. The company anticipates net capital spending of approximately $800 million, due to lower volumes. Previous guidance on net capital spending was $845 million. And finally, EBITDA margins for 2009 are now anticipated to be approximately 30.5%, before cost related to integrating our businesses. Previous guidance was 29.5%. The significant EBITDA margin improvement demonstrates our ability to secure higher pricing, even in this economic environment. Before going to Q&A, I'd like to comment on the exceptional performance of our entire organization. Don and I have been out in the organization conducting operation reviews. I can say with confidence that's two organizations that is, Republic and Allied are now operating as a cohesive unit. Our success in operating as a single team has allowed us to execute the most successful integration in the solid waste sector. Although we've been operating in a weak economy, I am very pleased with the team's financial performance. And before going to Q & A, I would like to have Don Slager, our President and Chief Operating Officer comment on the operating performance of the business units.

Thanks Jim. It's been a little more than a year ago that we began our pre-merger integration planning. From the beginning, Jim emphasized the importance of melding the two organizations. We were very intentional on who we selected for our integration team and how we constructed our integration plans. As we built our operating team and established our corporate and field organization, we remained very focused on blending the company. Now seven months into the merger, you can see the results of the organizational melding that has occurred. Teamwork, collaboration and mutual respect that's developed in Republic is something we're very pleased with. In short, the team has really gelled. Despite the challenging economy, the organization has demonstrated its ability to effectively price our business to offset and exceed inflationary costs. The team is diligently managed the middle and proven itself capable of adjusting the workforce and the fleet, for economic volume changes, on a real-time basis. Meanwhile we're executing our integration plan, with exceptional success. And with all this happening, we have improved our safety results to the best level in the company's combined history. As we visit the field, we continue to see the excitement that our people have for the company, and for what they are accomplishing. The results are a credit to our people who have a passion for this business and for our customers. Our field organization is looking forward now to the 2010 business planning process, as we continue to build our national business platform, and strategically develop our markets. We will continue to reward the Republic team for improvement in return on invested capital, and delivering consistent free cash flow.

Thanks Don. And with that, operator if you would, open the line to questions.

Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions). The first question is from Hamzah Mazari from Credit Suisse.

Just, could you touch on, given synergies and cost saves and your proceeds from asset sales and free cash flow guidance going up, you likely expect the faster deleveraging. You touched on how much debt you're going to pay down this year. Would you comment a little more on capital allocation going forward, specifically in 2010 and 2011, how to think about that?

Right now, I think as the investment community realizes, we're committed to paying down debt. And our commitment is to pay down $2 billion over the next three to four years. And you know that is where we're currently at. As any good business, as we meet quarterly, we continue to review our cash allocation, to debt and to our equity holders. But today we are committed, all the divestiture proceeds have been used, to pay down debt, a significant portion of the cash flows other than that are already committed to dividend, will be used, that's the balance of the $600 million that we are anticipating in '09. And, again, we're going to continue to reevaluate and revisit that, with the Board over the next year-and-a-half.

And just a follow-up question. Could you touch on volume declines a little more specifically, on whether you're seeing volume stablization, you didn't talk about that in the press release; also, on your commercial business. And could you give us a sense of, you talked about residential being down low-single digits. Would you give us a sense of what commercial is down, what industrial is down right now? How that compares to last year, and what you're seeing in July, in those business lines.

Sure. Sequentially, I think we're seeing the business to be relatively flat. Okay? Year-over-year, second quarter, we're looking at increasing volume losses due to service declines in commercial, continued weakness in the industrial collection business, which is predominantly construction-related of about 18%. Commercial is now running at about 5.5% to 6%. Residential is low-single digit as you mentioned, but escalating over the first quarter, we are looking at about 2.5% to 3% of volume decline there. Disposal, obviously related to weakness in the collection business, and volumes in general in the construction market, down about 16% to 17%. And the (inaudible) is roughly flat. And then as you look at the seasonal impacts, we've seeing very little seasonal impact. The little bit we saw was in the Mid-west, in the east we saw nothing. Even though we have pretty good construction seasons in the south and west, we usually do see some marginal pickup there from first and second quarter, we did not see that. And again our weakest areas appear to be the east and the Mid-west.

Our next question is from Scott Levine from JPMorgan.

Touching on the disposal volumes a little bit more detail, you indicated I think in the first quarter that you were seeing in addition to the weakness in C & D business, declining weights in your less cyclical business lines. We think about the trends Q2 to Q1 and then here in the early part of Q3. Is it getting better or worse in each of those areas or is one area or the other having more of an impact on disposal volumes and you know any additional color on that subject.

Obviously we continue to see some service declines in our commercial business. They are going to directly reflect on our third party disposal volumes. But I think when you look at unit weights and what we would call the annuity streams of the commercial small container business and residential business, we saw the unit weight decline, which obviously would some impact on disposal. We've seen it get a little bit better, still declining but not as much in the second quarter. So it appears to be flattening out.

Scott I would add there too. It's not really so much this year as it is last year. This year it seems to be rolling first to second and third at a relatively constant level. Obviously we didn't get the seasonal uptick. So, it's really more about last year ramping up second and third quarter than it is this year, ramping down. This year is consistent, last year it was moving up and therefore the comps are a little more difficult in the second and third quarter, and when we get to the fourth quarter, we view that as a trend that will reverse something.

We also -- this is Don. And we also didn't see the special waste jobs we typically see in the second quarter. That gap has widened on us a little bit. But we've got a pipeline full of volume. We just have to get the customers to release it.

And it's all evidenced by looking at our deflection rates. They are flat, they are relatively consistent with last year.

Understood. One last one maybe on pricing in the cyclical businesses. Sounds like things are starting away may be a little bit on pricing in the cyclical business a little bit more, but still seeing stability in the balance of the business, is that an accurate characterization? And if you could talk to me to a degree specifically on pricing and C&D and temporary roll-out?

Yeah, I'd say it is relatively flat, which is good. Again that's been one of the barometers that we told people to look to as to the stability of pricing in the sector. So I would say flat is good and we will see benefits of that as the economy starts to recover.

If I could add, I think to backup what Tod said in his comments. There's lot of mix that goes on in pricing calculation, but the fundamentals of the business has been strong. The pricing atmosphere and competitive pricing nature of the markets is pretty consistent with what we've seen in the past.

Do you feel like what you're saying the competition then?

We think the sector is stable.

The next question is from Corey Greendale from First Analysis.

Could you just speak to landfill pricing? I think it was last quarterly -- it was 4% this quarter, 3%, which is not to equivalent of 100 basis points, but are you seeing something move there more than expected or tougher to get the pricing than you expected?

Well, I think we've got a number of disposal contracts with the municipal sector. That we're seeing some pressure related just to the CPI being down. So that's predominantly it. We do see some weakening in the special waste markets, but again, nothing significant there. So as you said; disposal pricing at 3%, is still well above where it was three years ago, continue to drive pricing in the market place. And, you know we still feel very good about that.

Okay. And I know it's is hazardous to compare companies directly given the nuances of the calculation but --

Always in the hazardous waste business.

Feel that too. Since the other national company just reported, how do you -- their volume comp wasn't as negative as yours comparing Q1 to Q2. So I am not asking you to comment on that specifically, but how do you know that you are not losing share whether it's to another public company or to smaller competitors who may be starving and getting more aggressive on price.

When we look at our defection rates and our retention rates, we feel those are pretty good indicators of the stability of the market place. So we haven't seen any movement there in the area of 7% to 8%, and they have been for a number of years and I think I commented on that in the past. So, again those are our leading indicators. We also have other marketing tools out there with our customer relationship management system, which is a basically a telemarketing or not a telemarketing but a prospecting system. And we still have a very good funnel there and we also tracked our losses within that tool. So when we look at all those metrics, we say that the market is relatively stable again.

Next question is from Bill Fisher from Raymond James.

If you look at your kind of run rate gross margin now going forward, now that you got the divestitures out of there and I guess [feels] a little more stable. You have on one side of the pricing, synergies building and on the other side I guess the landfill volumes are down quite a bit. Can you just go forward with those kinds of variables or others and do you think you can continue to push up gross margins a bit as you go forward ex the seasonality.

You're talking for the short term, like first half of this year to second half. I think there's a little bit of a margin headwind due to higher fuel costs that we're seeing here. I think I mentioned that diesel was about $2.55, it's up from the second quarter average. And then the other is bad debt expense. We had some recoveries, we had some third party contractors to the government, and obviously there's is risk there if they don't pay us, so we had some reserves that we had set up at the end of last year that we recovered from payments, since we finally paid them, FEMA. So that's kind of a short-term headwind. I think as you look longer term, it becomes what Don and Jim spoke to, it's our ability to get pricing a little bit better than the CPI. Again it's not the absolute percentage of price, it's the relative price to CPI and costs that should allow us to expand margins from say, 30% modestly up each year. Maybe it's 50 or 100, 150 basis points over a multi-year cycle. So longer term we'd look [forward].

If I could add. Bill, this is Don. Tod mentioned in his comments that we didn't see the seasonality change Q1 to Q2 that we've enjoyed in previous years. If we had seen that seasonal revenue increase like it typically would, our margins would have even been better than they were in Q2. So, we're operating even a little better maybe than the margin says. And then our guys have done a great job, as I said in my comments, they are effectively getting price to exceed inflation. We've gotten really good at that in this company over the last three or four years. We have gotten really good at cost management over the last 18 months, because we've had to. And if this volume comes back naturally in to our business through our customers, we should see that volume come back at a good margin, right? So we think there is upside there.

We will probably see it in SG&A and other expenses. I think in my notes I mentioned, they are relatively fixed. And also DD&A, which is running close to 12% -- DD&A and Accretion is running close to 12%. So that's a couple of hundred basis points more than our capital spend, which obviously indicates a strong cash flow characteristic for the company.

And then just to follow up on -- given your landfill volumes are down say mid-teens. If you look at '010 kind of CapEx and you just got through '09 and you brought '09 down. Given the kind of landfill CapEx lags, is there a prospect that your '010 CapEx could be down, over '09?

I knew somebody would try to get guidance out of us for 2010, Bill. So we appreciate that, but we're not prepared to say that right now or to give guidance for 2010. So, the level of 800 is appropriate in today's economy, and I guess we'll look at what the appropriate level is when we do our planning in the fourth quarter.

One thing that we didn't touch on is kind of where our assets are, and our fleet [8] is pretty consistent. Right Don?

That's right. It's still about 7.2, so, we think the blended fleets really working well for us.

So as you look longer term, our CapEx somewhere in that 10% of revenue, is appropriate.

The next question is from Jonathan Ellis from Merrill Lynch.

Just to follow-up on a question earlier about the pricing outlook for the year. I know you mentioned that you are now anticipating price to be between 3.2% and 3.5%, I think previously it was 4%, and you highlighted the CPI as being one of the primary drivers. Just recognizing that, I think in most of your contracts the CPI is backward-looking, and theoretically you would have had some sense at the beginning of the year what CPI escalators would be. Are there any other factors, any other end markets where you spend some deviation pricing relative to your original expectations earlier this year?

No, Jonathan. And again, I guess my commentary on price would be that look that price is relatively strong at over 3%. It's consistent in the sector I think as we're seeing the reports come in. That pricing should allow us to expand margin and cash flows. And that is really kind of where we're at. We have some contracts, municipal contracts that are setting on a month-over-month basis, and that's creating a little bit of pressure. But overall, pricing is strong, it's going to continue to improve margin, and we're going to continue to be able to improve cash flows.

One thing Jonathan, is I think, what we missed was probably the CPI inflation. And inflation is maybe a little bit less than what we thought it might have been, earlier in the year. So, it really comes back to the relative price increase compared to inflation, which is probably a couple of hundred basis points above inflation. If you think back to what we said year-after-year, we need to get our return on investment backing to a decent level in this business, and to accomplish that, pricing that's maybe 100 to 150 basis points over CPI over a longer term should accomplish it. So I think it's more the relative price which is constant, than that 4% versus 3.5%. By the way, our second quarter pricing is consistent with the first quarter, and the guidance going forward is consistent. So while we were stretching towards 4%, the performance is really pretty consistent, pretty solid.

Okay, great, that's helpful. And then just my other question, as it relates to the impact of commodities, and fuel surcharges. And if I have this correct that you haven't changed your guidance for commodities to be about a 2% drag for the year, fuel surcharges to be about 2.5% drag year-over-year. And just given what's happened to commodity prices first half of the year, and as you mentioned, fuel prices going up, just curious why those full-year revenue guidance figures haven't been [adjusted].

I think a lot of it is the volume that we're seeing in our processing facilities. Jonathan, and that's really the lions share of it here.

The volume they are round about 11% I think.

And then we have seen some price escalation here, and we're still trying to see where all that stuff kind of bottoms out at. So to modify the guidance at this time we think it would be pre-mature.

If you look at the volumes that we generate and brokered volumes that come in that we deal with third parties, say from our first quarter $63 a ton to our second quarter $72 a ton, it's about $9. $9 or $10 net of the rebates that we give back at the volume levels that we're at should give us probably on an annualized basis somewhere between $0.01 to $0.02 of additional earnings. So, maybe there's a little upside there. And, hopefully, that's a base that we carry from 2009 into 2010.

(Operator Instructions) The next question is from Michael Hoffman from Wunderlich Securities.

Good morning, and congratulations on the progress. Clearly what we are consistently hearing through the conversation today is this ongoing concern and doubts about how do you possibly sustain price in this kind of volume pressure. Do you want to take another crack at sort of the explanation to the world of why this is sustainable?

Again, I guess what we have always said this. Its, if you're going to really look at margin expansion in this business, and you're going to look at improving the returns on invested capital, while cost improvement is always important, it is a mitigator. The reality is that you have to be dealing with the top line. I think the discipline that Don and the rest of the senior management has put in the organization, towards pricing, has really accomplished the results that you see today. And that discipline and that fortitude to do to continue to move it is what drives it. That's how simple it is. It is not simple to execute, but it is that simple when you come to the realization. If you're going to grow cash flows and improve margins it is going to come from the top line, expansion.

Remember the lions share of our business is in that 2%, 2.5% to maybe 5%, 5.5% margin decline. If you look at these economic cycles this may or may not be a little deeper or longer than '01 or '01 or 91. But this is a pretty stable resilient business. So ,those are relatively modest declines that should start to anniversary out here. And therefore, the price increases we think is very solid.

I would like to add, Michael, this is Don. The business hasn't changed right. We have always said and it is remaining, it is a capital intensive business. You have got to continue to reinvest. It is a people intensive business, there is a lot of cost and a lot of overheads in the business. You have inflation in your business. We're no different than a company bigger than us or the company smaller than us. Even the three-truck company has inflation. And you have got a price to meet or exceed that inflation, every year. Because you cannot make up for inflationary costs just through productivity. You just can't do it. We have some great productivity programs in the company. We are very excited about what we're accomplishing but you got to offset that inflationary change through pricing. And that's what we're seeing in the business. So again, what is most important, as Tod has said, the relationship between inflation and pricing. And that’s what we are seeing. We are seeing that continuing. Inflation maybe down a little bit but pricing is still going to meet or exceed that and that is really our battle cry. As Jim said we have got the controls in place internally to move that needle, and our field organization is really focused on it. And then ultimately, pricing is a function of what the market allows, and so, the market continues to move forward and people who own landfills understand the cost of operating and owning land fills in the perpetuity just like we do. And we have got price of land correctly and we are going to continue to move disposal pricing according to that cost and sort of to the liability profile those land fills represent. None of that has changed in the market. Yes, there is some volume pressure. But we haven't anything globally, anything on a national basis that makes us believe that people have changed their pricing philosophy. There is always going to be a pocket here or there. There is always going to be a manager who has bad facts, locally who makes a bad decision but those happen in isolation. And we have not seen any move that we think threatens the pricing platform for our business. I think people still remember what happened in the early 2000s and, we haven't seen anything like that. So we are very confident, we are very focused, and we're going to continue to take costs out of the business as the volumes change and we are going to add the costs back appropriately as the volumes come back and, hopefully, see volume come in at a better margin and we are going to continue to price, because we think we have got the controls and systems to do that.

Thank you. So, follow up on that what I am hearing is you have been able to cut into the cost structure, far deeper than you may have ever thought, given the economic environment. You have got this pricing leverage over inflation. You are disciplined from your customers, you're competitors. So what I am also hearing is that there is very little need to add a lot of costs back in as volumes recover except maybe in the roll-off space, and so the operating leverage to the upside, on any incremental tonnage is fairly significant, more than what probably we have ever seen before in the past?

We would like to think that, again, in my comments I said we have gotten better at cost management than probably ever thought we would. And for us to adjust our cost, is real time as we have. You have seen in our margins Michael, I think it is phenomenal. I think it is a great job by the field. They are tracking units against labor hours, and any time the units change, the labor hours have to track. They have taken almost a manufacturing approach to some of that cost. As volume comes back, as our truckloads increase we will have to add man hours and put trucks back on the street. We are going to manage it on the way up the same way we managed it on the way down and my expectation of the field organization is that we will see margin improvement and great margins come in as the volume changes and the leverage and as Tom said, again that volume grows back naturally. When the factory that went from three shifts to two shifts goes back to three shifts we get that volume. Say, just pick up a phone and ask for another load. When the restaurant calls and says, hey I know I reduced from six days to four days I need to go back to five and then to six days we will manage that on the way up, the same way as we did on the way down. But we will get it, I think with a better answer because of what we have learned about how to manage costs in this business. Again, this is the worst economy we have ever seen. In light of that I think that the results are exceptional.

I think like most businesses in America today running through this economy, they realized that potentially they got a little bit complacent in their business cost structure. I think we understand that and we understand I think going forward when the economy starts to expand, I think how much more we can stress the organization. So that kind of all really translates into additional margin and cash flow.

So with that, operator, I think we will conclude the questions.

In summary, I am very pleased with our second quarter results. We continue to be focused on achieving appropriate return on invested capital through pricing. Maintaining labor productivity through route and disposal optimization. Continue to meet and exceed expectations for realizing our merger synergies, generating higher levels of free cash flow performance and reinvesting in our people, and our business platform to insure customer service and a high quality, and safe work environment. I would like to thank our field organization for their continued focus on exceeding financial targets, integrating our national operating platform, and maintaining a high quality and safe work environment. I would like to remind everyone that this call is being recorded, and is available through August 2, 2009 by calling area code 203-369-1434. A recording to the call will be available on Republic's web site at www.republicservices.com. In addition, all of our SEC filings and discussions of business activities are available on our Web site. Thank you for spending time with us today, have a great day.

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