Good afternoon, and welcome to the Third Quarter 2015 Call for Investors in Republic Services. Republic Services is traded on the New York Stock Exchange under the symbol RSG. Today's call is being recorded and all participants are in listen-only mode. There will be a question-and-answer session following Republic’s summary of quarterly earnings. [Operator Instructions] It is now my pleasure to turn the call over to Brian DelGhiaccio, Senior Vice President of Finance. Good afternoon, Mr. DelGhiaccio.

Good afternoon and thank you for joining us. I would like to welcome everyone to Republic Services' third quarter 2015 conference call. Don Slager, our CEO, and Chuck Serianni, our CFO, are joining me as we discuss our performance. 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 a recording of this conference call, you should be sensitive to the date of the original call, which is October 29, 2015. 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 express 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. With that, I would like to turn the call over to Don.

Thank you, Brian. Good afternoon, everyone, and thank you for joining us. Our third quarter results represent another solid performance by the Republic team. We continue to successfully execute our plan resulting in improved pricing, positive volumes, and growth in earnings and free cash flow. We are realizing the benefits of our strategic initiatives while capitalizing on the steady improvement in solid waste trends. Some of our third quarter and year-to-date highlights include third quarter EPS was $0.53, and year-to-date free cash flow was $603 million. Both performance measures were in line with our expectations. Third quarter EBITDA margin was 28.1%, which is consistent with the prior year. Year-to-date EBITDA margin was 28.4%, which is in line with our full-year guidance. Core price in the third quarter was 3.6% and average yield was 2.5%. The sequential increase in yield performance reflects an improvement in the level of churn. We define churn as the revenue per unit difference between new and lost business. Third quarter volumes increased 60 basis points. Our collection volumes increased 1.1%, which continues to demonstrate that we can grow price and volume simultaneously. During the quarter, we invested $24 million in tuck-in acquisitions at a post-synergy EBITDA multiple of approximately 5.5 times. We remain on track to invest approximately $100 million in tuck-in acquisitions this year. As part of our efficient capital allocation strategy, we returned approximately $600 million to our shareholders through dividends and share repurchase since the beginning of the year. This includes 7.4 million shares repurchased for $298 million. Our Board recently approved a $900 million increase to our existing share repurchase authorization and extended the term through December 2017. We continue to make progress on our multi-year initiatives that enable us to execute our strategy of profitable growth through differentiation. Regarding our revenue…

Thanks, Don. Third quarter 2015 revenue was approximately $2.3 billion, an increase of $76 million prior year. This 3.4% increase in revenue includes internal growth of 1% and acquisitions 2.4%. The components of internal growth are as follows. First, average yield growth of 2.5%, average yield in the collection business was 3.2%, which includes 3.6% yield in the small container commercial business, 4.4% yield in the large container industrial business and 1.6% yield in the residential business. Average yield in the post-collection business was 70 basis points, which includes landfill MSW of 1%. Core price, which measures price increases that are rollbacks, was 3.6%. Core price consisted of 4.7% in the open market and 1.8% in the restricted portion of our business. Second, our volume increased 60 basis points year-over-year. The collection business increased 1.1%, which includes positive contribution from the industrial business of 2.5% and the residential business of 1%. The commercial business was flat with the prior year. Our commercial volume performance includes 40 basis point decline from non-regrettable losses of select national accounts customers and work performed on behalf of brokers. The post-collection business, made up of third-party landfill and transfer station volumes, decreased 1.1%. Landfill decreased 1%, which includes positive MSW volumes of 3.3% and C&D at 6.2%, offset by a decline in special waste volumes of 6.7%. Approximately half of the decline in landfill special waste relates to events driven jobs and the rest of the decline relates to a same-store E&P volumes. It should be noted that we had very tough comparison in the prior year since we accepted a record level of special waste in the third quarter of 2014. Now, fuel recovery fees decreased, next, fuel recovery fees decreased by 150 basis points. The change relates to the decline in the cost…

Thanks, Chuck. Before closing, I would like to discuss the 2016 preliminary outlook we provided in our earnings release. We are currently midway through our annual planning process and based on our initial reviews and assuming current business conditions, we project the following. EPS of $2.13 to $2.17, which includes a $0.03 headwind from a non-cash increase in our effective tax rate. If you exclude the tax rate headwind, EPS would be projected at $2.16 to $2.20 or 6% to 8% growth from the midpoint of our 2015 EPS guidance. Adjusted free cash flow of $790 million to $810 million. This represents 8% to 10% growth over the midpoint of our 2015 free cash flow guidance. I want to remind you that approximately 30% of our revenue is restricted based on CPI. Given the low CPI and low recycled commodity price environment, we believe our projected earnings and free cash flow growth is strong and reflects the benefits our strategic initiatives are delivering to offset headwinds that are outside of our control. Consistent with prior practice, we will provide detailed guidance in February 2016. To conclude, we are very pleased with our third quarter performance. As a result of improving fundamentals, together with solid operational execution, we expanded solid waste margins by simultaneously growing price and volume. We made meaningful progress on structurally changing recycling contracts and the use of alternative indices in our municipal customers. Generated earnings and free cash flow growth keeping us well-positioned to achieve our full-year 2015 financial guidance. And added $900 million to our existing share repurchase authorization demonstrating our commitment to increase cash returns to shareholders. As we look forward, we expect this positive momentum to continue into 2016. We will continue to deliver on our promises to our key stakeholders including our customers, our communities, employees, and of course, our owners. We will remain focused on managing the business to create long-term value by executing our strategy of profitable growth through differentiation. At this time, operator, we will open the call for questions.

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. [Operator Instructions] Thank you, speakers our first question is from Al Kaschalk with Wedbush Securities. Your line is now open.

I want to just focus on the volume collection story. I think 1.1 in the quarter, 0.6 volume I think overall reported. How is that trending in terms of ’16? Not so much from a guidance standpoint but just from an end market, tough comps, easy comps, because what was very clear is that your residential side was up at least it was positive. I can’t say so much for your largest competitor on that front.

Before we, I’ll give you a little flavor for ’16. Of course, we’re not going to give guidance. But first for ’15 for the quarter, it was good volume growth. Remember there were a couple of issues in that. One is the year-over-year comp on special waste. Last year, as Chuck said, in Q3 we had a record special waste quarter so still had a strong quarter in special waste in 2015 and the pipeline is still robust just had a tough comp there. And also we said in the comments, we kind of walked away from some business. It’s a non-regrettable losses in around national accounts and some our broker portfolio, so that was an up size event in the quarter of this year. So we frankly look at our volumes in C&D and in our large container perm business, the manufacturing business. As we said, as we roll to the year sequentially, we see the growth come down just because the comps got tougher but we still saw plus 2% growth in those lines. And as we’ve said all along, our growth is heavily dependent on household starts. Good special waste flow, good construction business leads to business formation and more broad recovery. So for 2016, we’re expecting positive growth to continue and of course when you look at our year-over-year guidance that we did provide, our preliminary outlook of pretty strong cash flow growth, you can hopefully see that we expect that trend to continue in ’16 for us.

Great. And then if I may, my follow-up. I couldn’t help but to notice on the expense side of things, maintenance and repairs up as a percentage of revenue, I think 60 basis points, year-to-date up above 40 relative comparable period. So is there anything going on there in terms of with automation related maintenance, sort of this integration of the trucks? Are there any operational issues that are coming, inefficiencies that maybe spiked that a little bit, at least on a relative analysis?

No, I wouldn’t say that there’s any kind of inefficiencies. Let me explain it this way. You’re right. The maintenance costs increase year over year about 60 basis points. So as we think about that, about 20 basis points relates to the reduction in the fuel recovery fee in the commodity revenue. About 10 basis points is the mix of business that I discussed earlier, so that’s the higher collection portion of the business and the lower landfill business. And about another 20 basis points then is increasing complexity associated with the fleet, which we’ve been talking about for a while now. And so keep in mind, we’re about 75%, 74% certified on our One Fleet initiative. We are closer to 90% actually rolled out that last sort of 15% hasn’t been certified yet. We’ll have One Fleet completed mid next year and start to realize all those benefits. As we said, we’re beginning to very methodically extend the useful life of the fleet. We’ll do that over the next, continue to do that over the next three or four years. So we’re very happy with our fleet initiative as it’s paying off. We think we’re going to have the most reliable fleet in the industry here. By the time we roll this One Fleet completely out next year, and we’ll be well-positioned to deal with the fleet complicity issues as they come. So and again really the issue in the margin is the mix stuff that Chuck described.

And Al, a good portion of that complexity is really the compliance with the new emission standards that really began in 2008, and there’s been a couple of generations of those engines but as you add more of those engines post 2008 and you have to comply with those enhanced emissions control, that’s basically what we're talking about with enhanced complexity.

So that should start to ease off the burden, I should say should start to see less of an impact, I guess?

Yes. And then of course there is an impact, there’s a cost impact while your rolling out One Fleet change, right, and when everyone is certified and running under the new standards, then we’ll get to bow [ph] away the costs when that starts to dissipate and go away as well.

Thank you. Scott Levine, Imperial Capital. Your line is now open.

I think, Don, you mentioned an improvement in churn is kind of a factor behind the improvement in yield there. Wondering if that’s indicative of a broad trend, you’re seeing momentum, just a little bit more color with regard to that aspect as the yield figures continue to surprise the upside this year.

Well first of all, everything we’ve been doing around the tools we’ve talked about, right. We’ve talked about rolling Capture out, which is our cloud-based tool, and our tighter sales force now is using the Capture tool, so we’ve got as we said, the goal there was to get much better control at the point-of-sale in the decision-making process. Also making that sales team more efficient and effective. The PBS training, we've talked about extensively. Really targeting more successfully customers that have more willingness to pay and have more sort of interest in value. That's all happening. We're actually going out with a little more price because we think the customer base is willing to take it and we frankly think our service levels have increased. Through fleet reliability, lowering turnover, improving customer commitments, and so on and so forth. So we think all of that happening from the efforts that we're undertaking as well as, frankly, the markets rational and there is some positive growth in the market and even the more irrational smaller competitors tend to be more rational when there is some positive organic growth. So I think all of that together is giving us a better answer in churn but we think certainly some of it is based on the efforts we've made to be more focused in that area.

Got it. And then as the follow-up, I guess, you talked about special waste being a negative here, I guess a portion of that is the weakness in the energy services in Tervita, and a portion of it maybe is kind of the more traditional special waste business. Can you elaborate further as to maybe the profitability and how that might compare in the MSW side of your landfill business, and should we expect that non-energy portion to come back in the fourth quarter? Or might that continue? Maybe a little bit more elaborate in the energy, or I'm sorry, the special waste pipeline in general.

Let separate the two. Let me first start by saying that the E&P business is 1% of our revenue. Okay, so that's really not the tail that's wagging the dog here. Our special waste year-over-year comp was tough because our ‘14 special waste was a banner year. But we still had a very good a quarter in special waste. We've got a full pipeline. So our special waste sales team is very confident that we're not seeing a slowdown there. So we think that special waste is good. As far as E&P goes, you read the papers, right, so I don't know that we're going to have a big recovery in Q4. There are -- we're hearing bits and pieces of good news and some new wells being drilled and so forth out there, but I think we'd like to believe it gets a little better from here. But again, it's a very small part of our business. So that's really not the headline, Scott.

Got it. So with regard to the volume trajectory here in the fourth quarter, not asking for explicit volume guidance but special waste it sounds like expect a continuation from Q3 and then trends in the traditional business should be healthy with a good pipeline?

Yes. So what we're seeing right now, Scott, is probably volume growth of about 1% for the year.

Got it. Great. Thanks. I'll turn it over.

Thank you, speakers our next question is from Corey Greendale with First Analysis. Your line is now open.

I was thinking about the trajectory on yields so understand CPI has a headwind next year but you've got more volume in the market which helps and you've got the full year of your priority based selling so can you just help us think through of how you're thinking about what yield looks like next year?

Yes. So, we're not going to give you yield guidance. Let me start by saying this. You know what portion of our portfolio is based on CPI. We're going to have a headwind just on CPI alone next year, year-over-year of about $0.04. Okay? We're going to overcome that headwind because of all the other things that we're doing in the business. We talked about all of the other issues that we're doing around priority based selling, Capture, all the rest of it, and again, we think volume will continue to be decent in 2016. So I can't give you much more toward ‘16 than that. We're going to give you detailed guidance in February. Just think about that overcoming CPI with about a $0.04 headwind but still a pretty strong EPS performance in that range I gave.

Hey and then this is also sort of a guidance question so hopefully you can answer this one. But first of all, the 2015 guidance, you raised the cash flow from OPS guidance. What's driving that? And then related to that, the 2016 the free cash flow guidance, growth is above the high end of EPS guidance growth. Can you just talk about what's driving that, if it's CapEx or working capital or cash taxes or something?

Yes, hey Corey, this is Brian. So if you kind of take a look, there's kind of a little bit of a push and pull there so we are anticipating spending a little bit less on cash taxes in 2015, and that was offset by a slight increase in capital spending and the two basically offset each other.

Okay. Then for 2016 is the fact that free cash flow growth is expected to be higher than EPS growth, is that driven by cash taxes or CapEx?

It is. It's actually being driven by bonus depreciation. So you get less of a reversal than in 2015, excuse me, in 2016 than we did in 2015.

Okay. Thank you.

Thank you speakers our next question is from Alex Ovshey from Goldman Sachs. Your line is now open.

Couple of one’s for you. So first on the shift of customers from CPI to alternative indices, so that’s $200 million now. I forget exactly over what time period that is. It sounds like about a year. Is that the sort of peace we should be thinking about? The goal is about $200 million per annum in terms of shifting from CPI? And just on that $200 million, that debt shift, out of the gate, what sort of impact does that have on pricing?

So Alex, it’s probably a little bit too early to still unfortunately to give you a cadence because again as you can appreciate, some of this depends on the size of the contracts that are coming to term, it depends on how frequently we’re opening contracts in the mid-term of a contract. Many of these changes have happened while the contract is still in place for the opening contracts for other reasons, things like service increased levels and those kind of things. So it’s going to depend on that pace. It’s also going to depend on basically frankly the market at large and how broadly it’s accepted. I think we proved in that it can happen and we started this a little over a year ago in earnest. And so we’re real happy with the progress. This $200 million is remember on that $800 million municipal vertical and so we’re call it a fourth of the way through that. And then we’ll be tackling some of the larger contracts that are in that other $1 billion plus of municipal business. At the same time, of course, we’re tackling the recycling fees. So there’s a lot of conversation happening with municipal customers, but we think we’re making good progress and we’ll just keep informing you as we go and we’ll be baking we think that trend is into our guidance and we have got it baked into what that preliminary outlook is for 2016 currently.

Got it. And on the recycling side, can you elaborate a little bit more what a fee-based model is. Is that essentially getting paid for the service and then only sharing in profits on top of what the actual cost to profit the material is?

That’s it. If you’re looking for a job, we can put you right on the front line convincing those customers just like you just did, right. So we need to have our cost of capital covered in the fee based. It basically is a more fair value sharing arrangement. It gives the municipality much more upside. It certainly drives them to produce a better quality volume, right, less contaminate which is important to the overall value of the material when we sell it. And it just can put excess from downside. But as I said in my comments, municipalities that we want to recycle, they want real sustainability. They want the durability of a program for the consumer base, for their ratepayers and this is a fair way to do it. So we made a pretty major switch in one of our largest if not the largest contract we have, and that’s a good place to start. And we’ll continue to work through the system as we go forward.

Okay. That makes a lot of sense. And just two quick ones from me. In terms of industrial volume, a lot of talk about parts of the industrial economy that are weakened. Obviously, some way, shape, or form it’s related to energy, and not direct energy has softened. So anything you guys see in the industrial vertical that gives you pause around volumes looking forward?

No, not today. I think again we’ve got continuing in our overall business, strong price in industrial, we call industrial perm, which is in container manufacturing, strong price and volume, over 5% price in our temp which is our construction part of that large container vertical. You probably see a little less activity in some of those economies, local economies where energy was booming. There’s certainly less infrastructure being developed than there was a year ago. That was a good headline story as we came out of the rut. But the rest of the country is holding up really well. So those are pretty broad-based numbers.

Got it. Okay Don. Thank you very much. I will turn it over.

You bet.

Your next question is from Joe Box with KeyBanc. Your line is now open.

So you picked up 4.7% core price in your open markets, which looks pretty solid to me. I’m just curious how you guys feel about your price position in those open markets. Are you meaningfully above the market? Are you in line? I guess what I'm trying to understand is if you have the ability to raise your pricing at a similar trajectory or even higher next year to offset that $0.04 CPI headwind.

The open market has consistently performed for us over the last couple of years, and we’ll continue to test the market, Joe. With the tools we have now, as you know, we can somewhat control the pricing activity, the price increase activity here from the corporate center using a process that we internally call RPM. So every month we’re looking at a portion of the customer base. It give us the ability to try to understand what price elasticity looks like in a given market. It allows us to put out an offer accordingly. We will continue to use that process of service pretty well. So what we think the pricing for next year is baked into the preliminary outlook we provided. Again, we'll give you a much more detail on that in February. But all systems seem to be go and the tools are working. The systems in place are working. The broader market is holding up well. The open market is performing well for us. As I said, a pretty rational market overall. Those are the things we need to see and as I said so many times, as long as organic growth continues, even the smaller callers tend to have more rational behavior around pricing when they're getting some measure of organic growth. So, those will continue. I think next year will shape up pretty well for us.

Understood. Thanks. And actually just a follow-up on pricing. Maybe just your current picture. You mentioned earlier a step-up in price just for your service overall. I'm curious if that's across-the-board or is it more concentrated in any particular business?

Well I think it's pretty strong overall. Again, I just said we got 5% price in our 10th business which is construction. That's pretty strong and open market small container is probably frankly one of our strongest. So yes, there's no one market that stands out as, no one part of the country that stands out in my mind as doing much better than any other part. It's pretty broad based which to me gives me a lot of confidence.

Got it. One quick follow-up, if you don't mind. Just relative to the free cash flow guidance for next year, do you guys have any CapEx savings baked into from One Fleet or is that more of a 2017 type item?

No. Absolutely. We've got One Fleet CapEx savings baked in of about $40 million, which is consistent with the savings that we saw in 2015. Keep in mind that what we talk about in terms of One Fleet is $200 million of savings that we're going to realize over the course of the next four or five years or so.

Thank you speakers our next question is from Michael Hoffman with Stifel. Your line is now open.

Let me follow-up on the free cash just so I haven't actually confused myself listening to all the questions and answers. If I understood Chuck's comment, there will be less cash tax paid because BD winds down incrementally and will you in fact spend less in absolute dollars in capital spending?

No.

No.

Okay. So there's no benefit to capital spending in free cash flow, if I wind is back, if it's 8 at the midpoint, I can walk it back to ex, the cash tax issue its 5.6 from good old operations? That's a way to think about it. So there's free cash flow growth driven by the underlying business ex the cash tax.

Absolutely, Michael.

You said it, Michael.

All right. That's what I wanted to make sure I understood. And then the churn comment I thought was interesting because -- am I wrong in thinking that churn has -- there's all kinds of interesting knock on consequences when churn is coming on and whether what is driving it down or things that happen as a result of being driven down. One of the biggest meaningful issues is that you don't have so many missed stops and missed stops are about the fleet breaking down, and so while we may see R&M up and everybody is wringing their hands about it, it clearly has introduced a more reliable fleet which just helps to lower the missed stops and all of those things that happen. Is that right?

That is right.

Okay.

We said it at the very beginning when we launched One Fleet. We are a fleet-based operation. We are the eighth largest location fleet in the nation. Whatever it is, 75% of our revenue comes from our collection business. And we make our money with trucks and very important that we have total fleet reliability. One Fleet has been about that, improving reliability in the fleet which we think improves employee engagement. It improves driver turnover. It improves service levels. It improves our brand on the street. And so on and so on and so on. It affects everything we do. So that's why we poured ourselves into One Fleet. It also allows us to methodically extend useful life of the fleet. Again which now we're second year in a row, now we're taking benefit in doing that. Again, very methodically over a four to five year period. Not just flipping a switch but with a better fleet overall. So yes, it runs through the organization. Again, churn is the difference in revenue per unit between gained and lost business.

Right.

That's simple, right? So we're also selling new business at a higher rate than we were last year. So if you signed up with us last year, you would maybe pay the slightly lower rate per unit and now we're selling more value where you're paying a higher rate per unit. So we watch that as well. So we’re addressing it fundamentally in the operations through being a better service provider, creating a better customer experience, and we're doing it through our sales efforts and all of our tools and then sort of our centralized controls on RPM, et cetera. All those things got to work together to really drive churn in the right direction. Again as I said, the fact that the market is rational and there's organic growth, that certainly helps our cause.

Right. And the other secondary benefit of that is all of those service issues, everybody is happier, coupled with good volume, underlying good volume in the market means you are keeping more of the price you are going to the market with. That’s…

That’s absolutely right. We’re going out with higher prices to the customer and a rollbacks are less. So we are keeping a higher percentage of a higher number. And again, it’s a big business with a lot of moving parts and we’ve got to do a lot of things right every day but all those efforts are showing up in churn.

Right. Okay. So I’ve always thought of garbage as evolutionary, not revolutionary. The evolution here is the steady reliable improving trend in the right direction.

There you go.

Okay. One thing. Special waste, I get the comp in the third quarter. Is there a rollover of any of that into the fourth quarter? So I’m just thinking about how to gauge my year-over-year trend.

No. I wouldn’t say that there’s as much rollover. We heard that some of the jobs that were scheduled to take place in the third quarter might have gotten pushed but we’re thinking that they’re probably more pushed into the first and second quarters of next year. So I would say, Michael, there’s not a lot of rollover into the fourth quarter this year.

But the fourth quarter comp for us is maybe a little tougher than norm to your point. We had this record year in Q3 last year. We had a pretty strong Q4 in special waste last year. But then normalizes after that.

Got it.

The report in from the sales team is not that the pipeline is drying up, just that we probably gave them too big of a goal. Last year, we had this record year so we tend to put the goals out there, but we still feel pretty confident that the special waste is not drying up. It’s continuing and next year’s trend will be pretty solid.

And to hit the 1% for the full year, 4Q would be up sequentially. It has to be.

Or relatively consistent with, Michael.

Okay. All right. Thanks.

You bet Michael.

Thank you, sir. Our next question is Tony Bancroft with Gabelli & Company. Your line is now open.

Taking into account all that you had in your prepared comments regarding the recycling and the answers you gave in the previous questions, can you still give us sort of a give me an overall what's like a realistic long-term goal for the percent switchover? I mean is it 100%, is it 50%, can you give me, what’s the appetite for or the attitude of a customer in that capacity?

If all of our customers are listening in all of my sales organization is listening, the long-term goal is 100%. Because frankly, again, you can’t have a business model that doesn’t return your cost to capital. Okay. And our recycling business today is improving because we’re improving operating costs. Because we’re shutting facilities. We’re actually investing in some facilities where we have good public/private partnerships who are willing to pay for recycling. But we’re going to change the model because we’ve got this macro thing going on with China. We don’t how long it’s going to last but that’s the new norm. We can’t live in that norm. We’ve got to live in a different world and that’s the conversation we had with a large customer that we described. So that gives me great hope that we can do it. We certainly have the appetite to do it and we’re not going to have a business that doesn’t return its cost to capital and give us good earnings results. On the new indices, it’s the same thing. A $0.04 headwind next year because CPI is going to knock us on our can so we can’t live that way. We have about $0.03 for every dollar of revenue around here goes to pay people, right. We are a people intensive business. We are a capital intensive business and got to replace truck’s containers, got to pay your people well if you want to attract the best people, and those people expect earnings increases and the last I checked healthcare is not getting cheaper, right, so CPI doesn’t cut it. If you are a business owner out there and you’re willing to live with 0.5% price increases in your contracts, you’re going to be sad by the time you get to the fifth year of your contract. That’s what we’ve been living through. So we’ve found other ways around it now. We finally said enough is enough last year and we started to move the index out and a lot of people said it couldn’t be done. The market wouldn’t go for it. We now have got 25% of that market vertical converted. And we’re not stopping there. It’s just a matter of the pace. And again, we’re going to make the appropriate returns for our owners in this business. We don’t have to haul everybody’s garbage. We just have to haul garbage for people that want good quality service for a fair price.

And then switching over to M&A for the back end of the year here. Could you go through maybe what the pipeline mix might be? I know that you said E&P is obviously only a small part of the business but what that would potentially be and then in the traditional solid waste side.

Most of it. Most of it’s going to be traditional solid waste. Some of those tuck-ins come with a little bit of recycling along with them, so we take that along with it. There may be in the NPS at out there two. If you could buy it right now but everyone is scared of it. We still think it's a good business through the cycle. We think it's going to come back over time and we're going to be happy with it but like the assets we own, like the people that we have in that business. We'll be selective but there might be a little bit of that. Again, that's not going to be the headline, Tony. The tuck-ins in the solid waste business come with very low risk, very high return. Again, as I said, low multiples net of synergy and our ability to integrate those is very, very quick. So we go from purchase date to with 120 days basically collecting the money and seeing the synergy benefits. So that's where we're going to play.

Right, and then just in that solid waste side, any potential $75 million ones like larger tuck-in or are they all going to be sort of small?

No, we don't see them on the horizon right now. There's really nothing out there that's really of that size that's interesting. They tend to be very small. But as we always say as a qualifier, we try to maintain a very flexible financial position. Even with this new upsized stock authorization we got from our Board. We have the flexibility to buy a little more if we want and if something of size comes on the market, we'll be able to take a good strong look at it.

Thanks. Appreciate it.

[Technical difficulty] Our next question is from Charles Carter from Raymond James. Your line is now open.

Good afternoon. Chuck, to go back to comments about kind of the solid waste margin expansion of 50 bps year-over-year, you said there was also a 20 basis point headwind from recycling, and then I think you also pointed out a 30 basis point headwind from, I didn't catch that one. A - Chuck Serianni. Yes, so the 30 basis point headwind in addition to that was from recent acquisitions including integration costs associated with those acquisitions.

Okay. And then, are you able to parse out what Tervita did? How that factored into the margin?

Yes, so when we think about that 30 basis points I just talked about, I would say the majority of that is Tervita.

Okay. Thank you. And then my next question is, given where diesel prices are, fuel and kind of the sub $50 per barrel oil environment we're in, is this kind of altering your CNG investments at all? Or how is that changing things in 2016 versus say 2015?

You will see it's just like we did in ‘15. We geared more of our purchase around CNG vehicles to facilities that we already had made the infrastructure investment in, right? So the goal is once the infrastructure is in place to convert the entire fleet at that local division to CNG. We saw less investment in new infrastructure around CNG in ‘15 and ‘14. We're still going through that calculation in ‘16 but we think CNG still is an overall sort of good investment. Remember, we are only converting to CNG for our replacement vehicles. We've got to buy whatever it is, 1,000 trucks a year as the old ones roll off, and we're replacing those in some cases with CNG. So we’re not going out and accelerating our fleet purchases just because natural gas is a good deal. So we like almost everything else we do, we sometimes get criticized for kind of taking the slow play on it but very slow, methodical, logical, and as the market shift moves, we think overall that's the right approach and you'll see more of that in CNG next year and we've taken some parts [ph] to recycling. We never jumped all in with both feet. We just kind of moved forward in the recycling business in a methodical way.

Okay. Thank you so much.

Thank you. That is all the time we have questions today. I will now turn the call back to Don Slager for any closing remarks.

Well, thank you, Tori. I would like to thank all Republic employees for their hard work, their commitment, and of course all your dedication and excellence and creating the Republic way. Thank you for spending time with us today. Have a good evening, and be safe out there.

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