Republic Services, Inc. (RSG)

FORM 10-Q | Quarterly Report
Apr. 25, 2019 9:45 PM
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About: Republic Services, Inc. (RSG)View as PDF
REPUBLIC SERVICES, INC. (Form: 10-Q, Received: 04/26/2019 06:17:12)
REPUBLIC SERVICES, INC.10-QMarch 31, 2019FALSE2019Q1Large Accelerated 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________ 
FORM 10-Q 
 _________________________________________________________
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                     
Commission File Number: 1-14267
_________________________________________________________ 
REPUBLIC SERVICES, INC.
(Exact name of registrant as specified in its charter)
_________________________________________________________ 
DELAWARE 65-0716904
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
18500 NORTH ALLIED WAY
PHOENIX, ARIZONA
85054
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (480) 627-2700
_________________________________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   þ     No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   þ     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer ¨
Smaller reporting company ¨
Non-accelerated filer ¨
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   þ
As of April 18, 2019, the registrant had outstanding  321,586,101 shares of Common Stock, par value $0.01 per share (excluding treasury shares of 31,258,690).


REPUBLIC SERVICES, INC.
INDEX
 
Item 1.
Consolidated Balance Sheets as of March 31, 2019 (Unaudited) and December 31, 2018
Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2019 and 2018
Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2019 and 2018
Unaudited Consolidated Statement of Stockholders' Equity for the Three Months Ended March 31, 2019
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

REPUBLIC SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
March 31,
2019
December 31,
2018
  (Unaudited)  
ASSETS
Current assets:
Cash and cash equivalents $ 68.0  $ 70.5 
Accounts receivable, less allowance for doubtful accounts and other of $33.2 and $34.3, respectively 1,073.7  1,102.7 
Prepaid expenses and other current assets 302.9  391.2 
Total current assets 1,444.6  1,564.4 
Restricted cash and marketable securities 115.1  108.1 
Property and equipment, net 7,989.7  8,020.1 
Goodwill 11,431.6  11,400.1 
Other intangible assets, net 115.1  106.5 
Other assets 685.9  417.8 
Total assets $ 21,782.0  $ 21,617.0 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 629.6  $ 761.5 
Notes payable and current maturities of long-term debt 1,595.6  690.7 
Deferred revenue 330.8  338.7 
Accrued landfill and environmental costs, current portion 134.0  130.6 
Accrued interest 79.5  68.5 
Other accrued liabilities 698.4  728.6 
Total current liabilities 3,467.9  2,718.6 
Long-term debt, net of current maturities 6,801.5  7,646.8 
Accrued landfill and environmental costs, net of current portion 1,707.3  1,701.6 
Deferred income taxes and other long-term tax liabilities, net 1,051.8  1,028.3 
Insurance reserves, net of current portion 270.4  270.8 
Other long-term liabilities 560.5  321.4 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.01 per share; 50 shares authorized; none issued —  — 
Common stock, par value $0.01 per share; 750 shares authorized; 352.8 and 351.9 issued and outstanding, respectively 3.5  3.5 
Additional paid-in capital 4,944.6  4,924.9 
Retained earnings 4,857.5  4,750.5 
Treasury stock, at cost; 31.1 and 29.4 shares, respectively (1,910.9) (1,782.6)
Accumulated other comprehensive income, net of tax 24.8  30.8 
Total Republic Services, Inc. stockholders’ equity 7,919.5  7,927.1 
Non-controlling interests in consolidated subsidiary 3.1  2.4 
Total stockholders’ equity 7,922.6  7,929.5 
Total liabilities and stockholders’ equity $ 21,782.0  $ 21,617.0 
The accompanying notes are an integral part of these statements.
3

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
 
Three Months Ended March 31, 
  2019 2018
Revenue $ 2,470.6  $ 2,427.5 
Expenses:
Cost of operations 1,506.1  1,469.8 
Depreciation, amortization and depletion 251.5  263.1 
Accretion 20.5  20.4 
Selling, general and administrative 266.4  261.2 
(Gain) loss on disposition of assets and asset impairments, net 0.3  (0.7)
Restructuring charges 3.0  9.5 
Operating income 422.8  404.2 
Interest expense (100.4) (94.8)
Loss from unconsolidated equity method investment (11.6) — 
Interest income 1.9  0.2 
Other income, net 0.1  1.0 
Income before income taxes 312.8  310.6 
Provision for income taxes 77.9  72.7 
Net income 234.9  237.9 
Net income attributable to non-controlling interests in consolidated subsidiary
(0.7) (0.2)
Net income attributable to Republic Services, Inc. $ 234.2  $ 237.7 
Basic earnings per share attributable to Republic Services, Inc. stockholders:
Basic earnings per share $ 0.73  $ 0.72 
Weighted average common shares outstanding 322.3  330.7 
Diluted earnings per share attributable to Republic Services, Inc. stockholders:
Diluted earnings per share $ 0.72  $ 0.72 
Weighted average common and common equivalent shares outstanding
323.5  332.2 
Cash dividends per common share $ 0.375  $ 0.345 
The accompanying notes are an integral part of these statements.

4

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
 
  Three Months Ended March 31,
  2019 2018
Net income $ 234.9  $ 237.9 
Other comprehensive income (loss), net of tax
Hedging activity:
Settlements
$ —  $ 0.6 
Realized gain reclassified into earnings (0.1) (0.2)
Unrealized (loss) gain (11.3) 18.7 
Other comprehensive income (loss), net of tax (11.4) 19.1 
Comprehensive income 223.5  257.0 
Comprehensive income attributable to non-controlling interests (0.7) (0.2)
Comprehensive income attributable to Republic Services, Inc. $ 222.8  $ 256.8 

The accompanying notes are an integral part of these statements.

5

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(in millions)
 
  Republic Services, Inc. Stockholders’ Equity  
  Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income, Net of Tax Non-controlling
Interests In Consolidated Subsidiary
  Shares Amount Shares Amount Total
Balance as of December 31, 2018 351.9  $ 3.5  $ 4,924.9  $ 4,750.5  (29.4) $ (1,782.6) $ 30.8  $ 2.4  $ 7,929.5 
Adoption of accounting standards
—  —  —  (5.4) —  —  5.4  —  — 
Net income —  —  —  234.2  —  —  —  0.7  234.9 
Other comprehensive loss —  —  —  —  —  —  (11.4) —  (11.4)
Cash dividends declared —  —  —  (120.7) —  —  —  —  (120.7)
Issuances of common stock 0.9  —  7.7  —  (0.2) (16.8) —  —  (9.1)
Stock-based compensation —  —  12.0  (1.1) —  —  —  —  10.9 
Purchase of common stock for treasury
—  —  —  —  (1.5) (111.5) —  —  (111.5)
Balance as of March 31, 2019 352.8  $ 3.5  $ 4,944.6  $ 4,857.5  (31.1) $ (1,910.9) $ 24.8  $ 3.1  $ 7,922.6 

Republic Services, Inc. Stockholders’ Equity
Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income, Net of Tax Non-controlling
Interests In Consolidated Subsidiary
Shares Amount Shares Amount Total
Balance as of December 31, 2017 350.1  $ 3.5  $ 4,839.6  $ 4,152.5  (18.4) $ (1,059.4) $ 22.6  $ 2.3  $ 7,961.1 
Adoption of accounting standards —  —  —  33.4  —  —  —  —  33.4 
Net income —  —  —  237.7  —  —  —  0.2  237.9 
Other comprehensive income —  —  —  —  —  —  19.1  —  19.1 
Cash dividends declared —  —  —  (113.3) —  —  —  —  (113.3)
Issuances of common stock 1.0  —  20.6  —  (0.3) (19.3) —  —  1.3 
Stock-based compensation —  —  11.4  (1.0) —  —  —  —  10.4 
Purchase of common stock for treasury —  —  —  —  (3.8) (235.6) —  —  (235.6)
Balance as of March 31, 2018 351.1  $ 3.5  $ 4,871.6  $ 4,309.3  (22.5) $ (1,314.3) $ 41.7  $ 2.5  $ 7,914.3 
The accompanying notes are an integral part of these statements.
6

REPUBLIC SERVICES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)

  Three Months Ended March 31,
  2019 2018
Cash provided by operating activities:
Net income $ 234.9  $ 237.9 
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, amortization, depletion and accretion 272.0  283.5 
Non-cash interest expense 11.0  10.9 
Restructuring related charges 3.0  9.5 
Stock-based compensation 11.1  11.1 
Deferred tax provision  27.7  25.3 
Provision for doubtful accounts, net of adjustments 7.5  6.8 
Gain on disposition of assets and asset impairments, net (1.4) (0.4)
Environmental adjustments (10.5) 1.4 
Loss from unconsolidated equity method investment 11.6  — 
Other non-cash items (0.1) 0.1 
Change in assets and liabilities, net of effects from business acquisitions and divestitures:
Accounts receivable 23.2  47.5 
Prepaid expenses and other assets 56.8  4.4 
Accounts payable (45.6) (3.2)
Restructuring expenditures (4.6) (8.4)
Capping, closure and post-closure expenditures (8.4) (7.3)
Remediation expenditures (7.2) (11.2)
Other liabilities (27.3) (26.5)
Cash provided by operating activities 553.7  581.4 
Cash used in investing activities:
Purchases of property and equipment (299.3) (263.3)
Proceeds from sales of property and equipment 4.1  3.6 
Cash used in acquisitions and investments, net of cash and restricted cash acquired (62.7) (19.1)
Cash received from business divestitures —  1.1 
Purchases of restricted marketable securities (5.0) (30.2)
Sales of restricted marketable securities 5.1  30.4 
Other (1.3) 0.8 
Cash used in investing activities (359.1) (276.7)
Cash used in financing activities:
Proceeds from notes payable and long-term debt, net of fees 1,104.9  1,093.9 
Payments of notes payable and long-term debt and senior notes (1,052.6) (1,073.4)
Issuances of common stock, net (9.1) 1.3 
Purchases of common stock for treasury (111.5) (254.5)
Cash dividends paid (121.0) (114.4)
Other (2.1) (2.5)
Cash used in financing activities (191.4) (349.6)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 3.2  (44.9)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year 133.3  179.1 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period $ 136.5  $ 134.2 
The accompanying notes are an integral part of these statements.

7

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION
Republic Services, Inc., a Delaware corporation, and its consolidated subsidiaries (also referred to collectively as Republic, the Company, we, us, or our), is the second largest provider of non-hazardous solid waste collection, transfer, recycling, disposal and energy services in the United States, as measured by revenue. We manage and evaluate our operations through  two field groups, Group 1 and Group 2, which we have identified as our reportable segments.
The unaudited consolidated financial statements include the accounts of Republic Services, Inc. and its wholly owned and majority owned subsidiaries in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). We account for investments in entities in which we do not have a controlling financial interest under either the equity method or cost method of accounting, as appropriate. All material intercompany accounts and transactions have been eliminated in consolidation.
We have prepared these unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted. In the opinion of management, these financial statements include all adjustments that, unless otherwise disclosed, are of a normal recurring nature and necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of the results you can expect for a full year. You should read these financial statements in conjunction with our audited consolidated financial statements and notes thereto appearing in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation. All dollar amounts in tabular presentations are in millions, except per share amounts and unless otherwise noted.
Management’s Estimates and Assumptions
In preparing our financial statements, we make numerous estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. We must make these estimates and assumptions because certain information we use is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methodologies. In preparing our financial statements, the more critical and subjective areas that deal with the greatest amount of uncertainty relate to our accounting for our long-lived assets, including recoverability, development costs, and final capping, closure and post-closure costs; our valuation allowances for accounts receivable and deferred tax assets; our liabilities for potential litigation, claims and assessments; our liabilities for environmental remediation, multiemployer pension funds, employee benefit plans, deferred taxes, uncertain tax positions, and insurance reserves; and our estimates of the fair values of assets acquired and liabilities assumed in any acquisition. Each of these items is discussed in more detail in our description of our significant accounting policies in Note 2, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Our actual results may differ significantly from our estimates.
8

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


New Accounting Pronouncements
Accounting Standards Adopted
Effective January 1, 2019, we adopted the following accounting standard updates (ASUs) as issued by the Financial Accounting Standards Board (FASB):
ASU Effective Date
ASU 2016-02 Leases (Topic 842) January 1, 2019
ASU 2017-12
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
January 1, 2019
ASU 2018-16 Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting January 1, 2019
ASU 2018-02
Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
January 1, 2019
ASU 2018-07
Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
January 1, 2019
ASU 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract January 1, 2019
Leases
Effective January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842)  (ASC 842 or the new leasing standard)   using the optional transition method prescribed by ASU 2018-11, Leases (Topic 842): Targeted Improvements . Upon adoption of the new leasing standard, we recognized a right-of-use asset and a right-of-use liability for leases classified as operating leases in our consolidated balance sheet. We applied the package of practical expedients to leases that commenced before the effective date whereby we elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases.
To assist in quantifying the impact on our consolidated financial statements and supplementing our existing disclosures, we designed internal controls over the adoption and implemented a software solution to manage and account for our leases. As of January 1, 2019, we recognized a right-of-use liability for our operating leases of $256.3 million classified as other accrued liabilities and other long-term liabilities and a corresponding right-of-use asset of $236.2 million classified as other long-term assets in our consolidated balance sheet. The right-of-use asset reflects adjustments for certain favorable or unfavorable leases recognized through acquisitions, prepaid or accrued rent, asset impairments and lease incentives, including but not limited to cash incentives, rent abatement or leasehold improvements paid by the lessor. We did not recognize a cumulative effect adjustment to retained earnings as of January 1, 2019 as the standard did not have a material impact on our consolidated statement of income. In addition, the standard did not have a material impact on our accounting for finance (capital) leases.
We assessed the disclosure requirements under the new leasing standard as part of our adoption. Refer to Note 8, Leases , included herein for our enhanced supplemental disclosures.
Derivatives and Hedging
Effective January 1, 2019, we adopted the FASB's ASU 2017-12,  Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities  (ASU 2017-12). We adopted the new guidance over income statement presentation and enhanced disclosures prospectively, and we adopted the guidance over the elimination of the separate measurement of ineffectiveness on a modified retrospective basis to existing hedging relationships as of the date of adoption. Prior to adoption, the net periodic earnings of our fair value hedges were presented within other income, net in our consolidated statement of income and are now presented within interest expense in our consolidated statement of income, i.e. the same line item as the effect of the hedged item. Our adoption of ASU 2017-12 did not have a material impact on our consolidated financial statements. 
Effective January 1, 2019, in conjunction with ASU 2017-12, we adopted the FASB's ASU 2018-16,  Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting  (ASU 2018-16) on a prospective basis. LIBOR is expected to no longer be published by 2021. Consequently, the FASB added the OIS rate based on SOFR as an eligible benchmark interest rate in order to facilitate the LIBOR to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies for both risk management and hedge accounting purposes. We are developing a plan to transition our interest rate
9

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


swaps from LIBOR to SOFR. Our adoption of ASU 2018-16 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2019.
Reclassifications of Certain Tax Effects from Accumulated Other Comprehensive Income
Effective January 1, 2019, we adopted the FASB's ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act (the Tax Act). The amendments only relate to the reclassification of the income tax effects of the Tax Act, and the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. Consequently, we reclassified $5.4 million of stranded tax effects from accumulated other comprehensive income to retained earnings.
Improvements to Nonemployee Share-Based Payment Accounting
Effective January 1, 2019, we adopted the FASB's ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (ASU 2018-07). ASU 2018-07 simplifies several aspects of the accounting for nonemployee share-based payment transactions resulting from expanding the scope of Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. We will apply the guidance prescribed by this update on a prospective basis. Our adoption of ASU 2018-07 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2019.
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract 
Effective January 1, 2019, we early adopted the FASB's ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) No. 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15) using a prospective approach. In accordance with the standard, we present capitalized implementation costs incurred in a hosting arrangement that is a service contract as other assets on our consolidated balance sheet. This presentation is consistent with the presentation of the prepayment of fees for the hosting arrangement. Historically, implementation costs were presented as a component of property and equipment, net.
As of January 1, 2019, we reclassified $28.7 million of capitalized implementation costs incurred in a hosting arrangement that is a service contract from property and equipment, net to other assets on our consolidated balance sheet. During the three months ended March 31, 2019, we recognized $8.1 million of amortization expense for the prepayment of fees and capitalized implementation costs incurred in a hosting arrangement as a component of depreciation, amortization and depletion in our consolidated statement of income. During the three months ended March 31, 2019, we recognized $5.2 million of payments for capitalized implementation costs in the same manner as payments made for fees associated with the hosting arrangement as a component of cash provided by operating activities in our consolidated statement of cash flows.
Accounting Standards Issued but not yet Adopted
Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. ASU 2018-13 is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. We are currently assessing the effect this guidance may have on our consolidated financial statements.
Changes to the Disclosure Requirements for Defined Benefit Plans
In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20) Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14). ASU 2018-14 removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. Although narrow in scope, the amendments are considered an important part of the FASB’s efforts to improve the effectiveness of disclosures in the notes to financial statements. ASU 2018-14 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted for all entities. We are currently assessing the effect this guidance may have on our consolidated financial statements.
10

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


2. BUSINESS ACQUISITIONS, INVESTMENTS AND RESTRUCTURING CHARGES
Acquisitions
We acquired various waste businesses during the three months ended March 31, 2019 and 2018. The purchase price for these business acquisitions and the allocations of the purchase price follows:
2019 2018
Purchase price:
Cash used in acquisitions, net of cash acquired
$ 50.6  $ 17.1 
Holdbacks
3.9  2.9 
Total 54.5  20.0 
Allocated as follows:
Accounts receivable
1.6  0.7 
Property and equipment
7.7  7.3 
Other assets
0.4  — 
Other liabilities
(0.4) (3.1)
Fair value of tangible assets acquired and liabilities assumed 9.3  4.9 
Excess purchase price to be allocated $ 45.2  $ 15.1 
Excess purchase price allocated as follows:
Other intangible assets
$ 12.7  $ 1.2 
Goodwill
32.5  13.9 
Total allocated $ 45.2  $ 15.1 
The purchase price allocations are preliminary and are based on information existing at the acquisition dates. Accordingly, the purchase price allocations are subject to change. Substantially all of the goodwill and intangible assets recorded for these acquisitions are deductible for tax purposes. These acquisitions are not material to our results of operations, individually or in the aggregate. As a result, no pro forma financial information is provided.
Investments
We   hold non-controlling equity interests in certain limited liability companies that qualified for investment tax credits under Section 48 of the Internal Revenue Code. During the three months ended March 31, 2019, we reduced the carrying value of these investments by $11.6 million   as a result of tax credits allocated to us, cash distributions, and our share of income and loss pursuant to the terms of the limited liability company agreements. We recognized no changes to the carrying value of these investments during the three months ended March 31, 2018.
Acquisition - Subsequent Event
In April 2019, we acquired all of the assets of a company and its affiliates, which collectively operated a hauling, transfer station, and recycling business in Oregon, for cash consideration of approximately $56 million. 
Restructuring Charges
In January 2018, we eliminated certain positions following the consolidation of select back-office functions, including but not limited to the integration of our National Accounts support functions into our existing corporate support functions. These changes include a reduction in administrative staffing and closing of certain office locations.
During the three months ended March 31, 2019, we incurred restructuring charges of $3.0 million that primarily related to upgrades to our back-office software systems.  During the three months ended March 31, 2018, we incurred restructuring charges of $9.5 million that primarily consisted of severance and other employee termination benefits and the closure of offices with lease agreements with non-cancelable terms . We paid $4.6 million and $8.4 million during the three months ended March 31, 2019 and 2018, respectively, related to these restructuring efforts.
In 2019, we expect to incur additional restructuring charges of approximately $5 million primarily related to upgrades to our back-office software systems. Substantially all of these restructuring charges will be recorded in our corporate segment.
11

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


3. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Our senior management evaluates, oversees and manages the financial performance of our operations through two   field groups, referred to as Group 1 and Group 2.
Goodwill
A summary of the activity and balances in goodwill accounts by reporting segment follows:
Balance as of December 31, 2018 Acquisitions Divestitures Adjustments to Acquisitions Balance as of March 31, 2019
Group 1 $ 6,150.6  $ 17.4  $ —  $ (1.0) $ 6,167.0 
Group 2 5,249.5  15.1  —  —  5,264.6 
Total $ 11,400.1  $ 32.5  $ —  $ (1.0) $ 11,431.6 

Other Intangible Assets, Net
Other intangible assets, net, include values assigned to customer relationships, non-compete agreements and trade names, and are amortized over periods ranging from 1 to  18 years. A summary of the activity and balances by intangible asset type follows:

  Gross Intangible Assets Accumulated Amortization Other Intangible Assets, Net as of March 31, 2019
  Balance as of December 31, 2018 Acquisitions
Adjustments
and Other  (1)
Balance as of March 31, 2019 Balance as of December 31, 2018 Additions Charged to Expense
Adjustments
and Other  (1)
Balance as of March 31, 2019
Customer relationships, franchise and other municipal agreements
$ 692.4  $ 11.1  $ —  $ 703.5  $ (607.2) $ (3.7) $ 0.2  $ (610.7) $ 92.8 
Non-compete agreements
37.0  3.1  0.9  41.0  (31.5) (0.9) —  (32.4) 8.6 
Other intangible assets
64.3  —  (6.1) 58.2  (48.5) (0.2) 4.2  (44.5) 13.7 
Total $ 793.7  $ 14.2  $ (5.2) $ 802.7  $ (687.2) $ (4.8) $ 4.4  $ (687.6) $ 115.1 
(1) In accordance with our adoption of the new leasing standard, we transferred $1.9 million of net favorable lease assets recognized through historical acquisitions to other assets as of January 1, 2019.

4. OTHER ASSETS
Prepaid Expenses and Other Current Assets
A summary of prepaid expenses and other current assets as of March 31, 2019 and December 31, 2018 follows:
2019 2018
Income tax receivable $ 105.3  $ 187.7 
Other prepaid expenses 72.7  75.6 
Inventories 55.4  53.1 
Reinsurance receivable 29.9  25.7 
Other non-trade receivables 25.7  34.4 
Prepaid fees for cloud-based hosting arrangements, current 9.9  10.2 
Other current assets 4.0  4.5 
Total $ 302.9  $ 391.2 
12

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Other Assets
A summary of other assets as of March 31, 2019 and December 31, 2018 follows:
2019 2018
Right-of-use lease asset $ 228.0  $ — 
Deferred compensation plan 107.8  100.0 
Deferred contract costs and sales commissions 87.0  89.2 
Reinsurance receivable 77.8  68.0 
Investments 61.4  73.0 
Prepaid fees and capitalized implementation costs for cloud-based hosting arrangements (1)
35.8  — 
Amounts recoverable for capping, closure and post-closure obligations 31.2  30.5 
Interest rate swaps and locks 13.3  12.8 
Deferred financing costs 3.9  4.2 
Other 39.7  40.1 
Total $ 685.9  $ 417.8 
(1) In accordance with our adoption of ASU 2018-15, capitalized implementation costs for cloud-based hosting arrangements are presented as other assets as of March 31, 2019. Similar costs are presented as a component of property, plant and equipment as of December 31, 2018.
5. OTHER LIABILITIES
Other Accrued Liabilities
A summary of other accrued liabilities as of March 31, 2019 and December 31, 2018 follows:
2019 2018
Insurance reserves, current $ 157.4  $ 152.9 
Accrued payroll and benefits 154.6  205.1 
Accrued fees and taxes 127.8  124.2 
Accrued dividends 120.7  121.0 
Operating lease liabilities, current 33.7  — 
Ceded insurance reserves, current 29.9  25.7 
Accrued professional fees and legal settlement reserves 14.0  13.1 
Other 60.3  86.6 
Total $ 698.4  $ 728.6 
Other Long-Term Liabilities
A summary of other long-term liabilities as of March 31, 2019 and December 31, 2018 follows:
2019 2018
Operating lease liabilities $ 214.3  $ — 
Deferred compensation plan 109.6  96.0 
Ceded insurance reserves 77.8  68.0 
Contingent consideration and acquisition holdbacks 69.6  73.9 
Interest rate swap locks 12.5  — 
Withdrawal liability - multiemployer pension funds 12.2  12.2 
Legal settlement reserves 10.0  10.0 
Pension and other post-retirement liabilities 6.0  6.0 
Other 48.5  55.3 
Total $ 560.5  $ 321.4 

13

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


6. LANDFILL AND ENVIRONMENTAL COSTS
As of March 31, 2019, we owned or operated 190 active landfills with total available disposal capacity of approximately 5.1 billion in-place cubic yards. Additionally, we had  129  closed landfills.
Accrued Landfill and Environmental Costs
A summary of accrued landfill and environmental liabilities as of March 31, 2019 and December 31, 2018 follows:
2019 2018
Landfill final capping, closure and post-closure liabilities $ 1,314.0  $ 1,292.0 
Environmental remediation 527.3  540.2 
Total accrued landfill and environmental costs 1,841.3  1,832.2 
Less: current portion (134.0) (130.6)
Long-term portion $ 1,707.3  $ 1,701.6 
Final Capping, Closure and Post-Closure Costs
The following table summarizes the activity in our asset retirement obligation liabilities, which includes liabilities for final capping, closure and post-closure, for the three months ended March 31, 2019 and 2018:
2019 2018
Asset retirement obligation liabilities, beginning of year $ 1,292.0  $ 1,257.7 
Non-cash additions 10.3  10.3 
Acquisitions, net of divestitures and other adjustments 0.1  0.1 
Asset retirement obligation adjustments (0.5) 0.3 
Payments (8.4) (7.3)
Accretion expense 20.5  20.4 
Asset retirement obligation liabilities, end of period 1,314.0  1,281.5 
Less: current portion (75.4) (76.8)
Long-term portion $ 1,238.6  $ 1,204.7 
We review annually, in the fourth quarter, and update as necessary, our estimates of asset retirement obligation liabilities. However, if there are significant changes in the facts and circumstances related to a site during the year, we will update our assumptions prospectively in the period that we know all the relevant facts and circumstances and make adjustments as appropriate.
The fair value of assets that are legally restricted for purposes of settling final capping, closure and post-closure liabilities was $29.8 million and $29.5 million as of March 31, 2019 and December 31, 2018, respectively, and is included in restricted cash and marketable securities in our consolidated balance sheets.
Landfill Operating Expenses
In the normal course of business, we incur various operating costs associated with environmental compliance. These costs include, among other things, leachate treatment and disposal, methane gas and groundwater monitoring, systems maintenance, interim cap maintenance, costs associated with the application of daily cover materials, and the legal and administrative costs of ongoing environmental compliance. These costs are expensed as cost of operations in the periods in which they are incurred.
Environmental Remediation Liabilities
We accrue for remediation costs when they become probable and can be reasonably estimated. There can sometimes be a range of reasonable estimates of the costs associated with remediation of a site. In these cases, we use the amount within the range that constitutes our best estimate. If no amount within the range appears to be a better estimate than any other, we use the amount that is at the low end of the range. It is reasonably possible that we will need to adjust the liabilities recorded for remediation to reflect the effects of new or additional information, to the extent such information impacts the costs, timing or duration of the required actions. If we used the reasonably possible high ends of our ranges, our aggregate potential remediation liability as of March 31, 2019 would be approximately $369 million higher than the amount recorded. Future changes in our estimates of the cost, timing or duration of the required actions could have a material adverse effect on our consolidated financial position, results of operations and cash flows.
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REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


The following table summarizes the activity in our environmental remediation liabilities for the three months ended March 31, 2019 and 2018:
2019 2018
Environmental remediation liabilities, beginning of year $ 540.2  $ 564.0 
Net adjustments charged to expense (10.5) 1.4 
Payments (7.2) (11.2)
Accretion expense (non-cash interest expense) 4.8  5.1 
Environmental remediation liabilities, end of period 527.3  559.3 
Less: current portion (58.6) (63.6)
Long-term portion $ 468.7  $ 495.7 
Bridgeton Landfill.  During the three months ended March 31, 2019, we paid $2.8 million related to management and monitoring of the remediation area for our closed Bridgeton Landfill in Missouri. We continue to work with state and federal regulatory agencies on our remediation efforts. From time to time, this may require us to modify our future operating timeline and procedures, which could result in changes to our expected liability. As of March 31, 2019, the remediation liability recorded for this site was $158.2 million, of which approximately $12 million is expected to be paid during the remainder of 2019. We believe the remaining reasonably possible high end of our range would be approximately $171 million higher than the amount recorded as of March 31, 2019.
West Lake Landfill Superfund Site . Our subsidiary Bridgeton Landfill, LLC is one of several currently designated Potentially Responsible Parties for the West Lake Landfill Superfund site (West Lake) in Missouri. On September 27, 2018, the U.S. Environmental Protection Agency (EPA) issued a Record of Decision Amendment for West Lake that includes a total undiscounted cost estimate of $229 million over a   four to five -year design and construction timeline. On March 11, 2019, the EPA issued special notice letters under CERCLA to Bridgeton Landfill, LLC and the other currently designated Potentially Responsible Parties to initiate negotiations to implement the remedy. At this time we are neither able to predict the final design of that remedy, nor estimate how much of the future response costs of the site our subsidiary may agree or be required to pay. During any subsequent administrative proceedings or litigation, our subsidiary will vigorously contest liability for the costs of remediating radiologically-impacted materials generated on behalf of the federal government during the Manhattan Project and delivered to the site by an Atomic Energy Commission licensee and its subcontractor. Currently, we believe we are adequately reserved for our expected remediation liability. However, subsequent events related to remedy design, divisibility, or allocation may require us to modify our expected remediation liability.
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REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


7. DEBT
The carrying value of our notes payable, finance leases and long-term debt as of March 31, 2019 and December 31, 2018 is listed in the following table, and is adjusted for the fair value of interest rate swaps, unamortized discounts, deferred issuance costs and the unamortized portion of adjustments to fair value recorded in purchase accounting. Original issue discounts and adjustments to fair value recorded in purchase accounting are amortized to interest expense over the term of the applicable instrument using the effective interest method.
    March 31, 2019 December 31, 2018
Maturity Interest Rate Principal Adjustments Carrying  Value Principal Adjustments Carrying Value
Credit facilities:
Uncommitted Credit Facility
Variable $ 87.3  $ —  $ 87.3  $ 33.4  $ —  $ 33.4 
June 2019 Variable —  —  —  —  —  — 
May 2021 Variable —  —  —  —  —  — 
June 2023 Variable 160.0  —  160.0  159.0  —  159.0 
Senior notes:
September 2019 5.500    650.0  (0.6) 649.4  650.0  (0.9) 649.1 
March 2020 5.000    850.0  (0.8) 849.2  850.0  (1.0) 849.0 
November 2021 5.250    600.0  (1.1) 598.9  600.0  (1.2) 598.8 
June 2022 3.550    850.0  (3.3) 846.7  850.0  (3.6) 846.4 
May 2023 4.750    550.0  (2.0) 548.0  550.0  (5.5) 544.5 
March 2025 3.200    500.0  (4.1) 495.9  500.0  (4.3) 495.7 
June 2026 2.900    500.0  (4.3) 495.7  500.0  (4.4) 495.6 
November 2027 3.375    650.0  (5.8) 644.2  650.0  (5.9) 644.1 
May 2028 3.950    800.0  (16.9) 783.1  800.0  (17.3) 782.7 
March 2035 6.086    181.9  (14.3) 167.6  181.9  (14.4) 167.5 
March 2040 6.200    399.9  (3.8) 396.1  399.9  (3.8) 396.1 
May 2041 5.700    385.7  (5.3) 380.4  385.7  (5.3) 380.4 
Debentures:
May 2021 9.250    35.3  (0.6) 34.7  35.3  (0.7) 34.6 
September 2035 7.400    148.1  (33.6) 114.5  148.1  (33.8) 114.3 
Tax-exempt:
2019 - 2044 1.950 - 2.500 1,042.4  (5.5) 1,036.9  1,042.4  (5.6) 1,036.8 
Finance leases:
2019 - 2046 3.070 - 12.203 108.5  —  108.5  109.5  —  109.5 
Total Debt $ 8,499.1  $ (102.0) 8,397.1  $ 8,445.2  $ (107.7) 8,337.5 
Less: current portion
(1,595.6) (690.7)
Long-term portion $ 6,801.5  $ 7,646.8 
Credit Facilities
In 2018, we entered into a $2.25 billion unsecured revolving credit facility (the Credit Facility), which replaced our $1.0 billion and $1.25 billion   unsecured credit facilities that would have matured in May 2021 and June 2019, respectively. The Credit Facility matures in June 2023. We may request  two   one -year extensions of the maturity date but none of the lenders are committed to participate in such extension. The Credit Facility also includes a feature that allows us to increase availability, at our option, by an aggregate amount of up to  $1.0 billion  through increased commitments from existing lenders or the addition of new lenders. At our option, borrowings under the Credit Facility bear interest at a Base Rate, or a Eurodollar Rate, plus an applicable margin based on our Debt Ratings (all as defined in the Credit Facility agreement).
The Credit Facility is subject to facility fees based on applicable rates defined in the Credit Facility agreement and the aggregate commitment, regardless of usage. Availability under our Credit Facility totaled $1,696.5 million and $1,694.1 million as of March 31, 2019 and December 31, 2018, respectively. The Credit Facility can be used for working capital, capital
16

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


expenditures, acquisitions, letters of credit and other general corporate purposes. The Credit Facility agreement requires us to comply with financial and other covenants. We may pay dividends and repurchase common stock if we are in compliance with these covenants.
As of March 31, 2019 and December 31, 2018 , we had $160.0 million and $159.0 million of borrowings under our Credit Facility , respectively . We had $376.2 million and $379.6 million of letters of credit outstanding under our Credit Facility as of March 31, 2019 and December 31, 2018, respectively.
Our Uncommitted Credit Facility bears interest at LIBOR, plus an applicable margin and is subject to facility fees defined in the agreement, regardless of usage. We can use borrowings under the Uncommitted Credit Facility for working capital and other general corporate purposes. The agreement governing our Uncommitted Credit Facility requires us to comply with certain covenants. The Uncommitted Credit Facility may be terminated by either party at any time. We had $87.3 million of borrowings and $33.4 million borrowings outstanding under our Uncommitted Credit Facility as of March 31, 2019 and December 31, 2018, respectively.
Senior Notes and Debentures
In 2018, we issued $800.0 million of 3.950% senior notes due 2028. Our senior notes and debentures are general unsecured obligations. Interest is payable semi-annually.
Tax-Exempt Financings
As of March 31, 2019 and December 31, 2018, we had  $1,036.9 million   and $1,036.8 million  of certain variable rate tax-exempt financings outstanding with maturities ranging fr o m 2 019 to 2044 , respectively . Approximately 100% of our tax-exempt financings are remarketed quarterly by remarketing agents to effectively maintain a variable yield. The holders of the bonds can put them back to the remarketing agents at the end of each interest period. To date, the remarketing agents have been able to remarket all of our variable rate unsecured tax-exempt bonds.
Finance Leases
We had finance lease liabilities of $108.5 million and $109.5 million as of March 31, 2019 and December 31, 2018, respectively, with maturities ranging from 2019 to 2046.
Interest Rate Swap and Lock Agreements
Our ability to obtain financing through the capital markets is a key component of our financial strategy. Historically, we have managed risk associated with executing this strategy, particularly as it relates to fluctuations in interest rates, by using a combination of fixed and floating rate debt. From time to time, we also have entered into interest rate swap and lock agreements to manage risk associated with interest rates, either to effectively convert specific fixed rate debt to a floating rate (fair value hedges), or to lock interest rates in anticipation of future debt issuances (cash flow hedges). 
Fair Value Hedges
During the second half of 2013, we entered into various interest rate swap agreements relative to our 4.750% fixed rate senior notes due in May 2023. The goal was to reduce overall borrowing costs and rebalance our debt portfolio's ratio of fixed to floating interest rates. As of March 31, 2019 and December 31, 2018 , these swap agreements ha d  a total notional value of $300.0 million and mature in May 2023, which is identical to the maturity of the hedged senior notes. We pay interest at floating rates based on changes in LIBOR and receive interest at a fixed rate of 4.750%. These transactions were designated as fair value hedges because the swaps hedge against the changes in fair value of the fixed rate senior notes resulting from changes in interest rates.
As of March 31, 2019 and December 31, 2018, the interest rate swap agreements are reflected at their fair value of  $5.9 million and $2.5 million, respectively, and are included in other assets in our consolidated balance sheet. To the extent they are effective, these interest rate swap agreements are included as an adjustment to long-term debt in our consolidated balance sheets.
For the three months ended March 31, 2019 and 2018, we recognized a loss of  $3.4 million and a gain of  $6.8 million, respectively, on the change in fair value of the hedged senior notes attributable to changes in the benchmark interest rate, with an offsetting gain of $3.4 million and an offsetting loss of  $6.8 million respectively, on the related interest rate swaps. The difference of these fair value changes  for the three months ended March 31, 2018 wa s recorded directly in earnings as  other income, net .  In accordance with our adoption of ASU 2017-12, the difference of these fair value changes for the three months ended March 31, 2019 was recorded directly in earnings as interest expense.
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REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


For further detail regarding the effect of our fair value hedging on interest expense, refer to Note 12, Financial Instruments , to our unaudited consolidated financial instruments in Item 1 of Part I of this Quarterly Report on Form 10-Q.
Cash Flow Hedges
As of March 31, 2019 and December 31, 2018, o ur interest rate lock agreements had an aggregate notional value of   $750.0 million  and $725.0 million, respectively, with fixed interest rates ranging from 1.900% to 3.250%. We entered into these transactions to manage exposure to fluctuations in interest rates in anticipation of planned future issuances of senior notes in 2019 and 2020. Upon the expected issuance of senior notes, we will terminate the interest rate locks and settle with our counterparties.   These transactions were accounted for as cash flow hedges. The fair value of our interest rate locks was determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (Level 2 in the fair value hierarchy). The aggregate fair values of the outstanding interest rate locks as of March 31, 2019  were assets of $7.4 million and liabilities of $12.5 million, and were recorded in other assets and long-term liabilities in our consolidated balance sheet, respectively. As of December 31, 2018,  $10.3 million w as recorded in other assets in our consolidated balance sheet.
Total unrealized loss recognized in other comprehensive income for interest rate locks w as  $11.3 million  for the three months ended March 31, 2019,  and  total unrealized gain recognized in other comprehensive income for the three months ended March 31, 2018 was  $18.3 million .  
As of March 31, 2019 and December 31, 2018, our previously terminated interest rate locks, recorded as component s of accumulated other comprehensive income, net of tax, w ere  income of $11.0 million and $11.2 million, respectively. The amortization of the terminated interest rate locks is recorded as an adjustment to interest expense over the life of the issued debt using the effective interest method. We expect to amortize approximately $0.8 million of net interest income over the next twelve months as a yield adjustment of our senior notes.
For detail regarding the effect of our cash flow hedging on interest expense, refer to Note 12, Financial Instruments , to our unaudited consolidated financial instruments in Item 1 of Part I of this Quarterly Report on Form 10-Q.
8. LEASES  
We lease property and equipment in the ordinary course of business under various lease agreements. The most significant lease obligations are for real property and equipment specific to our industry, including property operated as a landfill or transfer station and operating equipment. Our leases have varying terms. Some may include renewal or purchase options, escalation clauses, restrictions, penalties or other obligations that we consider in determining minimum lease payments. Our lease terms include options to renew the lease when it is reasonably certain that we will exercise the option. 
Certain leases require payments that are variable in nature based on volume measurements, e.g. a fixed rate per ton at our landfills. In addition, certain rental payments are adjusted annually based on changes in an underlying base index such as a consumer price index. Variable lease payments are recognized in our consolidated statement of income in the period incurred. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We generally account for lease components separately from non-lease components.
Leases are classified as either operating leases or finance leases, as appropriate. Leases with an initial term of 12 months or less are not recorded on our consolidated balance sheet. 
Operating Leases
Many of our leases are operating leases. Operating lease classification generally can be attributed to either (1) relatively low fixed minimum lease payments (including, for example, real property lease payments that are not fixed and vary based on the volume of waste we receive or process), or (2) minimum lease terms that are shorter than the assets’ economic useful life. We expect that, in the ordinary course of business, our operating leases will be renewed, replaced by other leases, or replaced with capital expenditures. We recognize rent expense for these leases on a straight-line basis over the lease term.
We recognize a right-of-use liability and right-of-use asset for leases classified as operating leases in our consolidated balance sheet upon lease commencement. The right-of-use liability represents the present value of the remaining lease payments. An implicit rate is often not readily available for these leases. As such, we use our incremental borrowing rate at the commencement date to determine the present value of the lease payments. Our incremental borrowing rate represents the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in a similar economic environment. In addition, we recognize a corresponding right-of-use asset, which represents our right to use an underlying asset for the lease term. The right-of-use asset is adjusted for certain favorable or unfavorable leases recognized through acquisition, prepaid or accrued rent, asset impairments and lease incentives, including but not limited to cash incentives, rent abatement or leasehold improvements paid by the lessor.
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REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Finance Leases
We capitalize assets acquired under finance leases at lease commencement and amortize them to depreciation expense over the lesser of the useful life of the asset or the lease term on either a straight-line or a units-of-consumption basis, depending on the asset leased. We record the present value of the related lease payments as a debt obligation. Our finance lease liability relates primarily to certain long-term landfill operating agreements that require minimum lease payments with offsetting finance lease assets recorded as part of the landfill development costs.
A summary of the lease classification on our consolidated balance sheet as of March 31, 2019 follows:
2019
Assets
Operating lease assets Other assets  $ 228.0 
Finance lease assets Property and equipment, net   119.7 
Total leased assets $ 347.7 
Liabilities
Current
Operating Other accrued liabilities $ 33.7 
Finance Notes payable and current maturities of long-term debt 5.7 
Long-term
Operating Other long-term liabilities 214.3 
Finance Long-term debt, net of current maturities 102.8 
Total lease liabilities $ 356.5 
A summary of the lease cost reflected in our consolidated statement of operations for the three months ended March 31, 2019 follows:
Three Months Ended March 31, 2019
Operating lease cost
Fixed lease cost Cost of operations  $ 9.3 
Short-term lease cost Cost of operations 10.1 
Variable lease cost Cost of operations  4.2 
Finance lease cost
Amortization of leased assets Depreciation amortization, and depletion 1.3 
Interest on lease liabilities Interest expense 1.9 
Variable lease cost Interest expense 1.3 
Total lease cost $ 28.1 

19

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Aggregate principal payments for operating and finance leases follows:
Operating Leases Finance Leases Total
2019 (remaining) $ 35.6  $ 9.9  $ 45.5 
2020 38.8  13.3  52.1 
2021 35.3  12.9  48.2 
2022 30.4  12.3  42.7 
2023 29.0  37.7  66.7 
Thereafter 137.3  128.4  265.7 
Total lease payments 306.4  214.5  520.9 
Less: interest (58.4) (106.0) (164.4)
Present value of lease liabilities $ 248.0  $ 108.5  $ 356.5 
A summary of the weighted-average remaining lease term and weighted-average discount rate as of March 31, 2019 follows:
March 31, 2019
Weighted-average remaining lease term (years)
Operating leases 9.1
Finance leases 15.5
Weighted-average discount rate
Operating leases 3.8  %
Finance leases 7.4  %
Supplemental cash flow and other non-cash information for the three months ended March 31, 2019 follows:
Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases $ 25.0 
Operating cash flows from finance leases $ 3.2 
Financing cash flows from finance leases $ 2.6 
Leased assets obtained in exchange for new finance lease liabilities $ — 
Leased assets obtained in exchange for new operating lease liabilities $ 1.7 

9. INCOME TAXES
Our effective tax rate, exclusive of non-controlling interests, for the three months ended March 31, 2019  and 2018  was 25.0% and  23.4% , respectively .
Cash paid for income taxes was a net refund of  $32.2 million and a net payment of  $0.4 million for the three months ended March 31, 2019 and 2018, respectively. The net refund received for the three months ended March 31, 2019 was primarily related to the receipt of funds from amended returns filed during 2018.
We have deferred tax assets related to state net operating loss carryforwards. We provide a partial valuation allowance due to uncertainty surrounding the future utilization of these carryforwards in the taxing jurisdictions where the loss carryforwards exist. When determining the need for a valuation allowance, we consider all positive and negative evidence, including recent financial results, scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies.
As a result of changes in U.S. tax law and our ongoing efforts to evaluate, streamline and maximize the efficiency of our tax footprint, we could adjust our valuation allowance in a future period if there is sufficient evidence to support a conclusion that it is more certain than not that a portion of the state net operating loss carryforwards, on which we currently provide a valuation allowance, would be realized. Future changes in our valuation allowance could have a material effect on our results of operations in the period recorded.
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REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The realization of our deferred tax asset for state loss carryforwards ultimately depends upon the existence of sufficient taxable income in the appropriate state taxing jurisdictions in future periods. The weight given to the positive and negative evidence is commensurate with the extent such evidence can be objectively verified. We continue to regularly monitor both positive and negative evidence in determining the ongoing need for a valuation allowance. As of March 31, 2019, the valuation allowance associated with our state loss carryforwards was approximately $73 million.
We are subject to income tax in the United States and Puerto Rico, as well as in multiple state jurisdictions. Our compliance with income tax rules and regulations is periodically audited by taxing authorities. These authorities may challenge the positions taken in our tax filings. We are currently under examination or administrative review by the Internal Revenue Service, state and local taxing authorities and Puerto Rico for various tax years.
We believe that our recorded liabilities for uncertain tax positions are adequate. However, a significant assessment against us in excess of the liabilities recorded could have a material adverse effect on our consolidated financial position, results of operations and cash flows. As of March 31, 2019, we are unable to estimate the resolution of our gross unrecognized benefits over the next twelve months.
We recognize interest and penalties as incurred within the provision for income taxes in the consolidated statements of income. As of March 31, 2019, we accrued a liability for penalties of $0.5 million and a liability for interest (including interest on penalties) of $12.0 million related to our uncertain tax positions.
10. STOCK REPURCHASES, DIVIDENDS AND EARNINGS PER SHARE
Available Shares
In March 2013, our B oard of D irectors approved the Republic Services, Inc. Amended and Restated 2007 Stock Incentive Plan (the Plan), and in May 2013 our shareholders ratified the Plan. We currently have approximately   12.8 million shares of common stock reserved for future grants under the Plan.
Stock Repurchases
Stock repurchase activity during the three months ended March 31, 2019 and March 31, 2018 follows (in millions, except per share amounts):
Three Months Ended March 31, 
2019 2018
Number of shares repurchased 1.5  3.8 
Amount paid $ 111.5  $ 254.5 
Weighted average cost per share $ 74.76  $ 66.69 
As of March 31, 2019, there were no   repurchased shares pending settlement. As of March 31, 2018, 0.2 million repurchased shares were pending settlement, resulting in an associated $14.9 million of share repurchases unpaid and included within other accrued liabilities.
In October 2017, our B oard of D irectors added $2.0 billion to the existing share repurchase authorization that now extends through December 31, 2020. Share repurchases under the program may be made through open market purchases or privately negotiated transactions in accordance with applicable federal securities laws. While the B oard of D irectors has approved the program, the timing of any purchases, the prices and the number of shares of common stock to be purchased will be determined by our management, at its discretion, and will depend upon market conditions and other factors. The share repurchase program may be extended, suspended or discontinued at any time. As of March 31, 2019, the remaining authorized purchase capacity under our October 2017 repurchase program was  $992.6 million.

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REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Dividends
In February 2019, our B oard of D irectors approved a quarterly dividend of  $0.375 per share. Cash dividends declared were $120.7 million for the three months ended March 31, 2019. As of March 31, 2019, we recorded a quarterly dividend payable of   $120.7 million to shareholders of record at the close of business on April 1, 2019.
Earnings per Share
Basic earnings per share is computed by dividing net income attributable to Republic Services, Inc. by the weighted average number of common shares (including vested but unissued RSUs) outstanding during the period. Diluted earnings per share is based on the combined weighted average number of common shares and common share equivalents outstanding, which include, where appropriate, the assumed exercise of employee stock options, unvested RSUs and unvested PSUs at the expected attainment levels. We use the treasury stock method in computing diluted earnings per share.
Earnings per share for the three months ended March 31, 2019 and 2018 are calculated as follows (in thousands, except per share amounts):
Three Months Ended March 31,
  2019 2018
Basic earnings per share:
Net income attributable to Republic Services, Inc. $ 234,200  $ 237,700 
Weighted average common shares outstanding 322,282  330,655 
Basic earnings per share $ 0.73  $ 0.72 
Diluted earnings per share:
Net income attributable to Republic Services, Inc. $ 234,200  $ 237,700 
Weighted average common shares outstanding 322,282  330,655 
Effect of dilutive securities:
Options to purchase common stock 504  904 
Unvested RSU awards 227  260 
Unvested PSU awards
437  389 
Weighted average common and common equivalent shares outstanding
323,450  332,208 
Diluted earnings per share $ 0.72  $ 0.72 
There were no   antidilutive securities during the three months ended March 31, 2019 and 2018. 
11. CHANGES IN ACCUMULATED OTHER COMPREHENSIVE INCOME BY COMPONENT
A summary of changes in accumulated other comprehensive income (AOCI) , net of tax, by component, for the three months ended March 31, 2019 follows:
Cash Flow Hedges Defined Benefit Pension Items Total
Balance as of December 31, 2018 $ 16.1  $ 14.7  $ 30.8 
Other comprehensive loss before reclassifications (11.3) —  (11.3)
Amounts reclassified from accumulated other comprehensive income (0.1) —  (0.1)
Net current period other comprehensive loss (11.4) —  (11.4)
Adoption of accounting standard 5.4  —  5.4 
Balance as of March 31, 2019 $ 10.1  $ 14.7  $ 24.8 
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REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

A summary of reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2019 and 2018 follows:
Three Months Ended March 31,
2019  2018 
Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the Statement where Net Income is Presented
Gain (loss) on cash flow hedges:
Fuel hedges $ —  $ 0.8  Cost of operations
Terminated interest rate locks 0.1  (0.5) Interest expense
Total before tax 0.1  0.3 
Tax expense —  (0.1)
Total gain reclassified into earnings $ 0.1  $ 0.2 

12. FINANCIAL INSTRUMENTS
The effect of our derivative instruments in fair value and cash flow hedging relationships on the consolidated statements of income for the three months ended March 31, 2019 and 2018 is as follows (in millions):
Classification and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships
Three Months Ended March 31,
2019  2018 
Interest Expense Interest Expense
Total amounts of expense line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded $ (100.4) $ (94.8)
The effects of fair value and cash flow hedging:
Gain on fair value hedging relationships:
Interest rate swaps:
Net swap settlements $ 0.1  $ 0.9 
Gain (loss) on cash flow hedging relationships:
Interest rate swap locks:
Amount of gain (loss) reclassified from AOCI into income $ 0.1  $ (0.5)
Fair Value Measurements
In measuring fair values of assets and liabilities, we use valuation techniques that maximize the use of observable inputs (Level 1) and minimize the use of unobservable inputs (Level 3). We also use market data or assumptions that we believe market participants would use in pricing an asset or liability, including assumptions about risk when appropriate.
The carrying value for certain of our financial instruments, including cash, accounts receivable, accounts payable and certain other accrued liabilities, approximates fair value because of their short-term nature.
23

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As of March 31, 2019 and December 31, 2018, our assets and liabilities that are measured at fair value on a recurring basis include the following:
March 31, 2019
  Fair Value
  Carrying Amount Total Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Money market mutual funds $ 37.7  $ 37.7  $ 37.7  $ —  $ — 
Bonds - restricted cash and marketable securities and other assets
49.1  49.1  —  49.1  — 
Interest rate swaps - other assets 5.9  5.9  —  5.9  — 
Interest rate locks - other assets 7.4  7.4  —  7.4  — 
Total assets $ 100.1  $ 100.1  $ 37.7  $ 62.4  $ — 
Liabilities:
Interest rate locks - other long-term liabilities $ 12.5  $ 12.5  $ —  $ 12.5  $ — 
Contingent consideration - other accrued liabilities and other long-term liabilities
71.0  71.0  —  —  71.0 
Total liabilities $ 83.5  $ 83.5  $ —  $ 12.5  $ 71.0 
December 31, 2018
  Fair Value
  Carrying Amount Total Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Money market mutual funds $ 37.1  $ 37.1  $ 37.1  $ —  $ — 
Bonds - restricted cash and marketable securities and other assets
47.8  47.8  —  47.8  — 
Interest rate swaps - other assets 2.5  2.5  —  2.5  — 
Interest rate locks - other assets 10.3  10.3  —  10.3  — 
Total assets $ 97.7  $ 97.7  $ 37.1  $ 60.6  $ — 
Liabilities:
Contingent consideration - other long-term liabilities
$ 71.4  $ 71.4  $ —  $ —  $ 71.4 
Total liabilities $ 71.4  $ 71.4  $ —  $ —  $ 71.4 
Total Debt
As of March 31, 2019 and December 31, 2018, the carrying value of our total debt was $8.4 billion  and $8.3 billion , respectively  and the fair value of our total debt was $8.9 billion   and $8.7 billion, respectively. The estimated fair value of our fixed rate senior notes and debentures is based on quoted market prices. The fair value of our remaining notes payable, tax-exempt financings and borrowings under our credit facilities approximates the carrying value because the interest rates are variable. The fair value estimates are based on Level 2 inputs of the fair value hierarchy as of March 31, 2019 and December 31, 2018. See Note 7, Debt , for further information related to our debt.
24

REPUBLIC SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Contingent Consideration
In April 2015, we entered into a waste management contract with the County of Sonoma, California to operate the county's waste management facilities. As of March 31, 2019, the Sonoma contingent consideration represents the fair value of $66.7 million  payable to the County of Sonoma based on the achievement of future annual tonnage targets through the expected remaining capacity of the landfill , which we e stimate to be approximately 30 years. The potential undiscounted amount of all future contingent payments that we could be required to make under the waste management contract is estimated to be between approximately  $79 million and $168 million.  During the three months ended March 31, 2019, the activity in the contingent consideration liability included accretion, which was offset by concession payments made in the ordinary course of business. There were no changes to the estimate of fair value. The contingent consideration liability is classified within Level 3 of the fair value hierarchy.
In 2017, we recognized additional contingent consideration associated with the acquisition of a landfill. As of March 31, 2019, the contingent consideration of  $4.3 million  represents the fair value of amounts payable to the seller based on annual volume of tons disposed at the landfill.  During the three months ended March 31, 2019, the activity in the contingent consideration liability included accretion, which was offset by concession payments made in the ordinary course of business. There were no changes to the estimate of fair value.  The contingent consideration liabilities are classified within Level 3 of the fair value hierarchy.
13. SEGMENT REPORTING
Our senior management evaluates, oversees and manages the financial performance of our operations through two field groups, referred to as Group 1 and Group 2. Group 1 primarily consists of geographic areas located in the western United States, and Group 2 primarily consists of geographic areas located in the southeastern and mid-western United States, and the eastern seaboard of the United States.   These two groups are presented below as our reportable segments, which provide integrated waste management services consisting of non-hazardous solid waste collection, transfer, recycling, disposal and energy services.
Summarized financial information concerning our reportable segments for the three months ended March 31, 2019 and 2018 follows:
Gross
Revenue
Intercompany
Revenue
Net
Revenue
Depreciation,
Amortization,
Depletion and
Accretion
Operating
Income
(Loss)
Capital
Expenditures
Total Assets
Three Months Ended March 31, 2019
Group 1 $ 1,430.9  $ (237.7) $ 1,193.2  $ 121.5  $ 288.2  $