Good afternoon, and welcome to the first quarter 2014 call for investors in Republic Services. Republic Services is traded on the New York Stock Exchange under the symbol RSG. [Operator instructions.] It is now my pleasure to turn the call over to Mr. DelGhiaccio. Good afternoon, Mr. DelGhiaccio.

Good afternoon, operator. Welcome, and thank you for joining us. This is Brian DelGhiaccio, and I would like to welcome everyone to Republic Services' first quarter 2014 conference call. Don Slager, our CEO; Glenn Culpepper, our CFO; and Ed Lang, Senior Vice President of Finance, are joining me as we discuss our performance. Before we get started, I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward-looking statements, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from 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 24, 2014. 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 a recording of this call, are all available on Republic's website at republicservices.com. And finally, I want to remind you that Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times, and presentations are posted on our website, along with instructions for listening to the live webcast of the event. With that, I would like to turn the call over to Don.

Thanks, Brian. Good afternoon everyone, and thank you for joining us. We are pleased with our first quarter results and are proud of the way the Republic team responded to challenging winter conditions. Even though we lost approximately 3% of our route days in the central and east regions due to weather, we reported positive volume growth, positive yield in all lines of business, and generated strong cash flow to fund substantial cash returns to shareholders. Some of the financial highlights for the quarter include first quarter EPS was $0.43. Excluding the weather impact, adjusted EPS would have been $0.45. About half of the $0.02 weather impact was due to lost revenue opportunities and the remainder was due to increased operating costs. Adjusted free cash flow was $186 million, and it was in line with our expectations. This level of performance continues to demonstrate the strong cash flow characteristics of our business. Core price in the first quarter was 3.2% and average yield was 1.2%. Average yield was comparable to the first quarter of the prior year, even with a 110 basis point decline in CPI-based pricing. We continue to see strong core price contribution from the open market to offset lower CPI-based price resets. First quarter volumes increased 1.5%. Volume growth was concentrated due to C&D roll off, national accounts, and landfill special waste. Commercial service level changes were positive in the first quarter and increased sequentially. This is a continuation of a trend that began in 2013. We returned $226 million to shareholders during the quarter through share repurchases and dividends. This includes 3.9 million shares repurchased for $132 million. We still expect to spend approximately $400 million on share repurchases in 2014. During the quarter, we continued to make progress on our multiyear initiatives that enabled us…

Thanks, Don. First quarter 2014 revenue was approximately $2.1 billion, an increase of $75 million from the prior year. This 3.8% increase in revenue includes acquisitions of 60 basis points and reflects the following three components of internal growth: pricing, volume, and recycled commodities. First, pricing. We had an average yield growth of 1.2%. First quarter average yield was consistent with the same period in the prior year, and in line with our expectations. Core price in the first quarter was 3.2%. Average yield in the collection business was 1.3%, which includes 2.7% yield in the industrial business and 1.2% yield in the commercial business. Average yield in the post-collection business was 1.4%, led by landfill and MSW, which increased approximately 2%. Fuel recovery fees increased 0.1%. Fuel costs increased approximately $2 million compared to the prior year, and decreased 20 basis points as a percentage of revenue. The average price per gallon of diesel decreased to $3.96 in the first quarter from $4.03 in the past year, a decrease of approximately 1.7%. The current average diesel price is approximately $3.95 per gallon. Second, volumes increased 1.5% year over year. The collection business was positive 1.1%, primarily due to an increase in industrial volume. Growth in the industrial line of business was 3.1%, which includes C&D and other temporary activity, which was up approximately 6%. Growth in the commercial business continues to be positive, but modest at 1.1%. Collection volume also includes a 50 basis point decline in the residential business, primarily due to contracts lost in bid situations. We will only renew business if it meets our return criteria. The post-collection business consisting of third-party landfill and transfer station volume was positive 1.8%, which includes an increase in landfill special waste of approximately 14%. Special waste landfill volumes were…

Thanks, Glenn. First quarter 2014 interest expense was $87 million, which included $11 million of noncash amortization. Our first quarter effective tax rate was 39.8% of adjusted earnings, and in line with our expectations. Our effective tax rate of 33.4% in Q1 of the prior year was favorably impacted by closing our open tax years under audit. The change in tax rate was expected, but resulted in a $0.05 EPS headwind compared to our prior year performance. First quarter 2014 adjusted free cash flow was $186 million, which was in line with our expectations. Net capital expenditures during the quarter were $213 million. At March 31, our accounts receivable balance was $873 million, and our days sales outstanding was 38 days or 25 days net of deferred revenue. Reported debt was approximately $7 billion at March 31, and excess availability under our bank facility was approximately $1.5 billion. I will now turn the call back to Don.

Thanks, Ed. To conclude, our first quarter results keep us on track to achieve the goals and objectives we established for 2014, and we remain comfortable with our full year guidance. The fundamentals of the business remain strong, and we are well-positioned to take advantage of an improving economy. We built our plan assuming the positive momentum exiting 2013 would continue, and we believe underlying business conditions are improving as expected. We remain focused on managing the business for the long term and creating lasting shareholder value. Our team remains dedicated to providing superior customer service and executing our strategy to deliver consistent earnings and cash flow growth. We are committed to an efficient capital structure, maintaining our investment grade rating, and increasing cash returns to shareholders. Before going to Q&A, I would like to personally congratulate three Republic employees for being selected as this year’s drivers of the year by the National Waste and Recycling Association. The three drivers are being honored for their outstanding customer service and safety records and were chosen out of 908 nominations from across the U.S. As this award is our industry’s highest honor, I’m proud that once again Republic secured all three of the coveted award categories. Congratulations Tino, [unintelligible], and Johnny. We look forward to celebrating your achievements with you next week at Waste Expo. At this time, operator, I’d like to open the call to questions.

[Operator instructions.] Your final question comes from Hamzah Mazari from Credit Suisse.

Just a question on volumes. Maybe you could give us a sense of any early read you have into seasonality. Are we going to see above normal seasonality based on what you’re seeing in volumes today? I realize it may be a little too early. And then by the same token, maybe you could touch on how much landfill volumes were up as well, if I missed that.

I will tell you that Q2 we’re off to a really good start in April, looking at a continuation of what we saw with specifically roll off C&D and special waste has been strong for us. So again, to your point, it is a little bit too early to judge seasonality. We usually like to have May under our belt before we can start to judge that. But we’re off to a good start in April. As far as landfill volume overall, we had a strong C&D and MSW, but total landfill volume was plus 4%. But special waste led the way, as Glenn said, up about 14%. So we lost some MSW volume. We’ve had some competitive losses, so about 1.6% decline over last year in trash coming into landfills based on competitive pricing.

And just a follow up question. I think you’re less than 3x net debt to EBITDA levered. There are a lot of larger assets out there that are private. I know historically you’ve spoken about this steady $100 million tuck-in sort of acquisition diet. Could you maybe just comment on how comfortable you are in taking leverage up? I know we did that in the Republic-Allied deal. How comfortable are you in taking leverage up to what level to do something larger that makes sense?

Well, we’ve always said I think our sweet spot is between 2.5x and 3x. So we’d like to keep it there. We’re right now at 3x. We do look at larger deals, and right now we are focused and have been on the small tuck-ins, because they come at the right multiple post-synergy and they also have less risk as far as integration goes. We do look at larger transactions, and we do have flexibility in our balance sheet to do things, whether we can do that using our revolver or if we had to flex the stock repurchase. We’re just looking at it from what’s accretive and what brings us the best returns. So if you look at our stock trading at 8.5, for us it kind of comes down to that. Would we rather spend 8.5x EBITDA buying into a company we know and love, that is Republic? Or do we want to put that money at risk? And we certainly aren’t going to be paying 9x or 9.5x for EBITDA. So if we can buy good free cash flow at the right multiple, we’re going to do that, and we’re going to consistently look at larger deals. And they do come across our radar every now and then, but we’ve got to be disciplined in our purchasing strategy.

And the limit on our credit facility as far as the covenant test is debt to EBITDA of 3.5x, so again, we’re an investment grade credit. Our credit metrics are consistent with that type of a credit rating, and the credit facility does have a limit in debt to EBITDA in order to ensure that type of a rating.

The next question that I show comes from Derek Sbrogna with Macquarie.

Just wanted to drill in a little bit here on the weather. The $0.02 impact, can you maybe talk a little bit more about where you see the lost revenue opportunities and also I know you framed out the three areas where costs have increased. If you could maybe provide some additional color on why those costs go up in poorer weather?

Well, weather specifically. We had some really severe weather in parts of the country that we normally budget weather in, places like Chicago and Detroit. But this was pretty harsh weather if you live there. We had brutal cold and we had snow day on day. And then we saw weather in parts of the country we don’t normally budget for weather. We don’t budget for snow in Atlanta and places like that. So when you have weather like that, we have two things happen. We have loss of revenue from garbage not moving to our landfills or us not hauling roll off loads from businesses that aren’t operating. You have some pickup from the fact that some days you don’t run your trucks. But then when you have to come back and pick up where you left off and make up for that lost time, you’re paying a lot of overtime. And you have frankly, in some of the really brutal weather, things tend to break when it’s subzero for many days in a row. You know, steel gets brittle and your maintenance costs go up, those kind of things. So again, I know we’re not the only company out there beyond the waste industry that’s had to talk about weather, and so we’re not using that as an excuse. We just wanted to point it out, that we did have some impact. And frankly, a solid $0.02 from a half cost and half revenue loss, but I think that frames out the fact that we’re really positive on the underlying fundamentals of the business units and as to the question I answered from Hamzah, we’ve got a good start here in April, and we think the underlying fundamentals are strong.

And maybe just one more. You’ve seen a couple of consecutive quarters here of the strength in specialty waste. I know that there’s been some easier comps, and maybe that business can be lumpy. But can you talk about the environment you’re seeing in those markets and whether some of the pickup is really indicative of you guys winning business, or whether it’s just indicative of a strengthening environment.

I would say it’s new volume. We talk about how our business tends to lag the economy, both on the downside and the return. And we would tell you that as we see special waste volumes returning, it is an indicative sign of better economy to come. When companies are releasing bids for special waste cleanups, it’s because they’ve got confidence in their own capital budgets. And a lot of times, the special waste is land clearing for new construction, so that bodes well for what’s to come. So we’ve got a strong market in special waste and C&D, and we’re just waiting for that to lead the way for a stronger return in commercial.

Next is from Corey Greendale with First Analysis.

First, a question on the brokered recycling volume. I understand that that’s [unintelligible] because of slow capex, but it is suppressing EBITDA margins, so it would be helpful to understand just what is happening without that in it. The 50 basis point decrease that I think Glenn talked about from that particular [unintelligible], is that the right way to think about this, that EBITDA margin would have been 50 basis points higher if it weren’t for the growth in that business?

The national accounts brokered volumes would account for a 30 basis point decrease in our margins in the quarter. And the reason for it really is we’re required to book the full amount of the revenue and the full amount of the costs, even though in many cases we’re not even handling the product. And so it’s really just a pass through, but we have to record both the revenues and the costs gross.

And I know the dynamic kind of contrasting internal growth components, you versus Waste, there’s nothing new, but because it was almost the sole focus of Waste’s call earlier, I just want to ask. The fact that you’re reporting better volume and lower on yield than Waste Management, how much do you attribute that to philosophy versus the markets you’re in and do you expect that to change with this next generation ROI pricing tool that you’re talking about?

That’s a big question, so I’ll give you some color. One, we don’t focus primarily just on yield metric. There’s a lot more to consider when you think about where you want to grow your business and how you want to balance price and volume. So we’re trying to give both positive price and volume in our business, and of course we’re focused on return on invested capital. So when it comes to where we’ll walk away from business, we want to walk away from business when it’s not profitable, when it doesn’t give us an appropriate return. We want to retain business that gives us the appropriate return, even if it is a competitive bidding type of a situation. So we take two very different views. One in the post-collection business. We have consistently raised prices in the landfill business, and consistently let volume go that didn’t meet our pricing expectations. Those landfills are expensive to own and operate, and we feel that they should carry a higher price component of growth every year. So as I said, we actually saw more defection in our landfill business in Q1, 1.6% volume loss, and all that volume loss because they found a better price somewhere else. So a little different view in the hauling side, as I said. In our commercial business, that density really matters, and it’s a very profitable part of our business. So when we’re in a competitive situation over a current customer, we’re going to try to keep that customer if it’s profitable and has the right return. Now, we’re growing our rollup business, because that part of the business is starting to come back. And while some might argue that that part of the business has a lower return than other parts of the business,…

Joe Box with KeyBanc Capital Markets, your line is open.

Don, it sounds like you guys are getting pretty close to getting over the hump on One Fleet, at about 47% installed. I think comps get a bit easier in Q2 on the maintenance and repair side. Are you still thinking that mid to late 2014, One Fleet starts to pay for itself?

Yeah, when half the fleet is certified and no longer causing that cost [unintelligible] wave, we’ll start seeing more and more benefits from the first half of the fleet. Again, improved productivity, less downtime, better customer service, driver engagement scores improve in the business. So we’re still positive about the process. Again, this is a really big change initiative as we’ve talked about, and it’s kind of slow going, but the deeper we get into it, the more committed we are to it. It’s the right thing to do. It’s going to pay us back. And then of course over and above that, just running a better business, having a stronger operation and a better customer service reliability, we’re going to have that reduced capex over the long term. So we’re committed to getting more out of our fleet and beginning to reduce capex in 2015 by $40 to $50 million a year over a four or five year period.

No, I certainly get the benefits of it. Maybe just to dig into the numbers a little bit, and I get that Q1 maintenance and repair expenses probably were somewhat inflated by weather, but should we start to think about that year over year increase in maintenance from repair leveling off? Or even declining on a year over year basis?

Well, we’ll just try to put it into the context of this. The three initiatives that we’ve got going on in our cost and productivity are One Fleet, our C&D and our automation. They’re worth about 100 basis points over a three-year period. So that’s the way we’d have you look at it, and we’re going to have better science around this as we get into it, and ultimately we’re going to get really good at understanding the efficient frontier of our fleet and tweaking our maintenance even further. But more of our stand today is that 1% across those three initiatives of operating costs over a three-year period.

I just want to as one very high level question for you. It seems like there’s been several states out there that have added recycling mandates recent, which I guess I find it a bit interesting, because at the same time you have waste firms like yourself that are pushing back and even rationalizing some recycling assets. So I guess what would you tell us? How should we think about reconciling the difference between what customers are saying versus what vendors are doing right now. It just seems like you guys are kind of moving in opposite directions.

I guess start with we don’t think recycling is going away. We think it’s core to our business and we recognize the customer demand. At the same time, we’re in the business to turn a profit, and we need to expand our business services to meet customer needs as long as they bring the appropriate return. So again, Glenn mentioned that we’ve rationalized a couple of assets. We closed a couple of facilities, because they weren’t bringing us the proper return. It really is a market by market basis. So we’ve got 240 markets across our 40 states. California is not going to change. They’re going to continue to have very strong recycling goals, and they’ve got teeth in those goals. Consequently, they’ve also got a lot of money to spend in education and the recycling is much more a part of the social conscience there. There are other states that are similar to that. There are some states that have increased their goals, but they really haven’t put any teeth around that. It comes down to regulation, it comes down to density, participation rates, and ultimately for us it’s got to come down to, can we create a decent return? And in some markets, we think we’ll be able to have a good return on recycling. In other markets, we won’t. And consequently, we won’t do it or we’ll do it through a third party. In some cases, we have a network of third parties that we use their facilities and so forth, because we don’t want to make that investment just yet. So we’re just taking a very disciplined approach. I think it’s a slow mover. It’s probably moving a little quicker than it was 10 years ago, but I think our approach has been pretty rational. It seems that the industry seems rational today, and there have been some companies that grew from nothing in recycling over the years, but they don’t tend to stick around very long. We look at this thing over the 10 year cycle, so when we make those investments we look at what are these commodities worth over the long term.

Next comes from Alex Ovshey with Goldman Sachs.

A couple of questions. On the volume side, looking at your key geographies and the parts of the country where you weren’t impacted by weather as much, was there a notable difference in volume trends there relative to the northeast/southeast during the quarter?

I think we had pretty good volumes kind of across the board, but the west did a great job for us. They didn’t have weather. So our west region is Texas to California and up to Oregon/Washington. So not a lot of weather impact. Good economic recovery. We’ve got a very good landfill network in the west. A good special waste quarter for us there, and if we look at those underlying trends there, and that’s what gives us a lot of confidence in just the overall fundamentals of the business. So as I said, weather is kind of out of the way now. April is starting off very strong, and we’ve got a lot of confidence going forward.

And then on the recycling side, there’s been some volatility in the recycling paper commodity prices. They went up materially in March, and then we gave it back in April. Do you have any visibility into what recycled paper commodities will do over the next couple of months? Any thoughts around that?

I would just tell you flat. I wish I had a crystal ball, then I would know when to bet on the Bears again. But flat, I think, from our perspective.

That’s fair. And just a last one from me. Can you update us on the Southern California market with Puente Hills now being closed for more than six months? Anything incremental and interesting there?

We have the closest landfill in the heart of the market. Consequently, we have probably the highest price landfill in the market as far as our rates and our rates to customers. So when that landfill closed, a lot of that volume went to Orange County. They took the volume at a reduced rate, built a transfer station there at La Puente. And we did not really benefit from any volume and any volume that we would get would come at higher rates to sort of work within our current rate structure. We’re not looking at discounting there in L.A. to attract cheap volume.

Michael Hoffman with Wunderlich, your line is open.

Service intervals, you alluded that you were seeing positive service interval changes. And then you shared in several of your answers areas like the western region and the volume trends. It seems through the breadth of the call so far there’s this sentiment of just fundamental volume improvement occurring. And no hockey sticks, but just an overall trend that’s moving in the right direction. Is that how I’m supposed to interpret some of the things you said?

Yeah, I would say we’re very positive. No hockey stick, that’s important. Everyone would like to think that there’s some inflection point, because everything’s going to kind of happen at once. We don’t see that happening. A lot of good momentum, albeit slow, we think, specifically for Republic. We’re doing a lot of the right things. We’re improving the core business, we’re working on costs, we’re working on our panel agenda, we’re focused on the customer. We’re doing a lot of good things to improve the business and the economy is responding better than it has in previous years. So a lot of good trends, and that’s why I said we’re comfortable in confirming our guidance. We’re strong on the cash flow. We’re buying back our stock. We’re very positive on that, so all in all, we felt we had a really good quarter and we think we’re going to finish the year right on track.

You have a 28.5% to 29% EBITDA guidance. So we’re reaffirming that for full year 28.5% to 29%. So to do that, is your pricing covering inflation at this point? I’m trying to figure that out. The price you report, are we covering inflation at this point? Your inflation.

Remember, we’ve got to go out and get better price in the open market to do that. So I would tell you, we’re comfortable with what’s going on in our commercial open market business, our industrial business. Our residential business continues to be a drag for us. That’s been a real low spot for us, the state municipal finance, the condition of those cities. We’re taking a harder stand on some of these renewals. They want us to deploy more and more capital and if you look at some of these recent bids that have been on the Street, they want every kind of automation and every kind of recycling and the capital intensity is growing, but their willingness to pay is not. So we’re taking a different position there. So we’re going to have to work a little harder to get the cost recovery out of those residential contracts that are only giving us 1.5% CPI. But you know, we’re trying to make up for it in other parts of the business. So we do think the pricing environment is improving subtly, not CPI, necessarily, but the open market. And we’re going to continue to try to improve the quality of our products and services to earn more from the customers.

And that translates into disposal pricing as well?

Well, yeah, I’m not so sure how much more we can do to improve our quality in the landfills for disposal customers. I think it just comes down to what’s available in the marketplace. And we’ve consistently raised our prices at landfills, and we’ve consistently lost volume at landfills. So that’s okay with us, because we think those assets are so critical. So over time, I think as I said probably many times, as the general consumer sentiment improves, as general volumes improve, I think competition behavior improves, I think that speaks well to pricing overall, and hopefully disposal pricing as well.

And Michael, remember we discussed in the call that we had 60 basis points of margin headwind in the first quarter that will not recur during the rest of the year. So essentially what we’re looking at is, with the current low CPI environment, flat margin performance year over year when you look at ’14 full year compared to 2013.

The next question comes from Al Kaschalk with Wedbush Securities.

Just to follow up on that, the 60 basis points of headwind, is that the remediation?

No, that was the impact of weather. It was about 30 basis points. And in Q1 of 2013 we had a benefit of an alternative fuel tax credit which obviously goes through the fuel expense line. So the combination of those two items, the 60 basis points unique to the first quarter of this year and not rolling into the second quarter.

And Don, just on this whole pricing dynamic, and I appreciate some of the comments and responses you’ve had here, on the landfill side, realizing the market is local, are you suggesting or implying that you’re on average having trouble - maybe that’s the wrong word - raising price at the landfill because it is deflecting volume away?

Well, we lost 1.6% volume in MSW at the landfill, and they were all pricing related losses. One specifically was a bid at a municipality, and others were individual customers. So we’re going to continue to raise landfill prices. Again, landfills are expensive to own and operate. They need to be able to handle year on year price increases that cover those additional costs. And so we’re going to continue to do that. We can’t subsidize other people in the business by lowering landfill rates. Can’t do that. And so that’s the way we’ve approached our infrastructure for many years and we’re going to continue to do that.

And then on the volume side, I’m sorry, I joined the call a little late, the number was what it is in the first quarter, but the trend here is a little bit more headwind in the back half of the year or comps relative to the back half of 2013?

Our guidance for the full year on volume was 1.5% to 2%, so I would say we’re tracking right within our expectations.

And then finally, it sounded like you said earlier that the open market pricing is trending up, not necessarily accelerating, but there’s net improvement in the overall price environment?

Well, I think we expect it to continue to improve through the year. We’ve relied, as we said at the beginning of the year, when we gave guidance, we’re going to have to rely on the open market to carry a little bit more pricing than it did last year in light of the low CPI environment in the rest of our index business. And we think that’s going to be the case. As I said, we’ll get 4.2% core pricing in the open market as a component of that 3.2% core. So we’re consistently out in the market looking to improve the quality of revenue. Some of those through pricing actions for existing customers as well as the pricing structure that we’re using to bid on new business.

The next question comes from Tony Bancroft with Gabelli.

Quick question on any update with municipal contracts? I saw the news with the Los Angeles last week. Anything there as far as new trends or color there?

No. Are you talking about the City of L.A., on Puente?

The Los Angeles contract, where they decided to break it up into I think 11…

Yeah, they’re going to franchise that. So we’re involved in that process. There’s a limited number of sections of the city that you’re able to win. We’re going to be a part of that process. We expect that because of our capability and the location of our landfill that we’ll fare okay in that process. And it’s a little ways away yet, but we’re knee deep into it, and that’s all I can report for now. But we’ll keep you updated as we get a little further down the road.

And I am showing no further questions at this time.

All right, 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.