Good afternoon and welcome to the second quarter 2010 conference call for investors in Republic Services. Republic Services is traded on the New York Stock Exchange under the symbol RSG. Your hosts this afternoon are Republic Chairman and CEO, Mr. Jim O'Connor; and Republic President and COO, Mr. Don Slager. Today’s call is being recorded and all participants are in a listen-only mode. There will be a question-and-answer session following Republic’s summary of quarterly earnings. (Operator instructions) At this time, it is my pleasure to turn the call over to Mr. O'Connor. Good afternoon, Mr. O'Connor.

Good afternoon, Holly. Welcome and good afternoon and thank you for joining us this. I would like to welcome everyone to Republic Services' second quarter conference call. Don Slager, our President and Chief Operating Officer; Tod Holmes, our Chief Financial Officer; and Ed Lang, our Treasurer, are joining me as we discuss our second quarter and first half year performance. Before we get started, I’d like to take a moment to remind everyone that some of the information that we discuss today 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. Additionally, the material that we discuss today is time-sensitive. If in the future, you listen to a rebroadcast or a recording of this conference call, you should be sensitive to the date of the original call, which is July 29th, 2010. Please note that this call is the property of Republic Services Incorporated. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Republic Services is strictly prohibited. I am very pleased to report that Republic Services has again outperformed in the second quarter of 2010 due to our continued commitment on – to improving return on investment, expanding EBITDA margins, and generating additional free cash flow. We have seen a 370-basis point sequential improvement in our volume. And although core price is slightly due to the impact of CPI, total price exceeds costs and EBITDA margins continue to expand. Accordingly, we are raising our EPS and free cash flow guidance. We are increasing our adjusted EPS guidance to a new range of $1.69 to $1.71 per share from $1.63 to $1.67 per share. Our adjusted free cash flow guidance is increasing by $25 million – the new range – to a new range of $725 million to $750 million. Additionally, our Board of Directors has approved a 5% increase in our quarterly dividend to $0.20 per share, payable October 15th, 2010. This action represents the Board executing the first phase of our cash utilization strategy and we expect to finalize the second phase relating to share repurchase in the next Board meeting in early part of November. We will discuss the share repurchase plan at that time. As we complete our integration process this year, Republic has significant operating leverage to benefit from the economic recovery and is positioned to achieve record margin performance. Now, I would like to turn the call over to Don Slager, our President and Chief Operating Officer, to discuss the second quarter highlights. Don?

Thanks, Jim. Our second quarter results reflect our continued focus on safety, cost control, operating efficiency, customer service, and pricing. Financial highlights for the second quarter are, we had revenue of approximately $2.1 billion, Republic had positive internal growth of 0.9%. This is the first time we have had positive internal growth since Q3 2008. We expect to have positive total revenue growth in the second half of 2010. Net income, adjusted primarily for merger related expenses, was $166.4 million or $0.43 per share. Our adjusted EBITDA margin was 31.3%. This strong performance demonstrated the strength of our field organization to maintain the focus on pricing in a low-inflation environment and cost-competitive structure, while completing the integration process. Our total price improvement, including fuel surcharges and higher commodity values, was 4.2%. Core price increase for the second quarter was 1.6%. Our pricing was down sequentially due to the impact of lower CPI on our index-based business, which represents 50% of total revenue. We continue to use our ROI pricing tools to be sure all business activity meets our requirements. Our volumes declined year-over-year by 3.3%, which is a 370 basis points improvement versus first quarter. Our commercial collection business has started to see increases in service frequency and we continue to see volume improvement in our industrial and landfill lines of business. We expect that by the fourth quarter our volumes will be flat to slightly positive. Year-to-date, adjusted free cash flow was $402 million or $1.05 per share. This is a 124% of adjusted book earnings. As you know, free cash flow is the best measure of quality earnings. We remain on track to meet our synergy target of $185 million to $190 million by year-end. This strong performance has enabled us to increase our quarterly dividend and increase…

Thanks, Don. Second quarter 2010 revenue, as Don said, was $2.1 billion. After considering the impact of revenues from operations divested in 2009, same-store revenue increased $18.4 million or almost 1%. Again, as Don mentioned earlier, this is the first positive internal growth since the third quarter of 2008 and consists of the following. Core price growth of 1.6%. In total, the collection lines of businesses saw a price increase of about 1.9% in the second quarter. This collection average includes commercial price of about 2%, industrial price of a little over 2.5%, and residential price of approximately 1.5%. I would like to remind everybody that our residential business has the largest percentage of index-based customers at over 70% index, and was impacted by the low CPI levels during the past 18 months. We still expect current-year CPI to be positive, but at lower levels than originally anticipated. Now, our landfill pricing. Landfill pricing, overall, increased by 1%. This includes municipal solid waste of 2.7% and that was partially offset by positive, but relatively lower-priced C&D and special waste event driven work. Again, we expect to achieve 2% price for the full year, which is within our original guidance range. In the second half, we will benefit from continued strength in our open market price, we will anniversary out some lower 2009 index pricing, and we will benefit from a 1% increase in environmental recovery fees that began in July. Now, let's talk briefly about recycling. Recycling commodity revenue had an increase of 1.5%. Prices increased approximately 67% to an average of $120 a ton in the current quarter from $72 per ton in the prior year. Second quarter MERS commodity volume of 464,000 tons was up sequentially by about 9%, however, was flat with the prior year. Currently, we…

Thanks, Tod. Don and I would like to comment on the process for executive transition here at Republic. As an organization, we believe that every successful company needs a plan to build, develop, and retain the appropriate level of management talent. Our Board of Directors has been focused on succession planning as a high priority for many years. One of the benefits of the merger was a much stronger talent base to draw from. When I announced my intention to retire, we began to execute the details of our plan with the goal to ensure a seamless transition. I am extremely confident that we are on the course to continue our track record of success and have full faith in Don to lead the next chapter of Republic's success. Most of the investment community already knows Don. If you don't, I can tell you that he has a proven track record as a leader, extensive experience in the industry, and maybe most important, a deep sense of commitment to our company shareholders. Over the course of the next five months, I will be working with Don to transition responsibilities and ensure a smooth and orderly succession. I look forward to participating in the 2011 planning process and I am especially committed to finalizing and closing out the first successful large-scale merger in the solid waste industry before I leave Republic Services. Now, I would like to turn it over to Don.

Thanks, Jim. I agree that our transition will be a smooth one. Our succession announcement and related plan was well received across the organization and our transition plan is on track. As you already know, I selected Kevin Walbridge to join the management team at Phoenix where he will serve as Executive Vice President of Operations. I'll be working closely with Kevin and his team as I transition my day-to-day operating responsibilities. I look forward to serving our employees, our customers, and our shareholders as CEO on January 1st. Jim and I have built a strong team at Republic and I have great appreciation for their abilities and their contributions to our success. I welcome the opportunity to work with such a fine group of people. The entire team is committed to fulfilling the goals that Jim and I laid out for the company at the beginning of the year and likewise, they all share a strong belief in our company and our strategy. Republic has a very clear management objective – several objectives that I would like to reiterate specifically. We will maintain a safe and high-quality work environment for our people. We will continually improve our customers' experience and ensure that we are meeting their needs and managing their waste streams effectively. We will improve our return on capital through a disciplined approach to cost management, pricing, and capital allocation. We will intelligently grow our business through superior market planning and strategic investments. We will achieve and maintain lasting operational excellence throughout the organization and we will continually develop our people, build our talent, and expand the organization's capability. This of course all leads to our core objectives, which are to maintain a strong capital structure and generate consistent, high levels of free cash flow and return increasing amounts of free cash flow to our shareholders through dividends and share repurchase. There is nothing new in these objectives, so if it sounds like more of the same, well, it is. This focus has delivered significant total returns to stakeholders during the past 12 years and we are committed to staying on this path. I am confident that the Republic team will optimize the value and strength of our assets and our market position. We will continue to deliver on the benefits of the merger and further Republic's track record of solid execution and value creation. Thanks again to our field management team for delivering outstanding performance during the first half of 2010. With that, I will ask our operator to join the call as we open the lines for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator instructions) Our first question comes from Scott Levine. Your line is open.

Thank you. Good afternoon, guys.

Good afternoon, Scott.

I was hoping you could provide maybe a little bit more color regarding the pricing trends that you are seeing in the marketplace sounds like you are disciplined, but CPI is coming in a little bit lower than you expected. And maybe a bit more color regarding churn rates that you are seeing in your business as well?

Yes, sure, Scott. This is Don. When we first did guidance and built our plan, we didn't expect CPI to dip down to 1.1% in the middle of the year like it did. And so – again, most of the reason for the 1.6% pricing is that just that CPI adjustment. And so as you know, half of our business is CPI index. That's really what is driving that. But we are seeing good – we are seeing good pricing in the marketplace and we've got a process build where we are reviewing all the customers annually, falling into a kind of an equal buckets throughout the year process, which works pretty well for us. So we've got good pricing across all lines of business, we are pretty happy with what we are seeing out there. What was the other part of your question?

Yes, it was really – regarding the churn rates, whether you are seeing any change there or –?

Yes. (Multiple Speakers) We've – we are down around the 7% in the section [ph] of our business for the quarter. So we've always kind of looked at that kind of 8% being a good range and saw it pretty flat.

Understood. A follow-up then on SG&A, if I can, you went below 10% of sales here. You could – I think you guys signaled 10% is about what we should expect. Is this about as low as you think it can get and we kind of hold here or as a conceivable, we could go lower?

No, I think it's realistic that we can go lower. I mean, obviously the SG&A is a function of the economy and as the volumes come back, we could leverage it down into the 9% plus range.

We really talked about holding the dollars. The reinvestment (inaudible) whole dollar reinvestment.

So as the business grows, the percentage drops.

Exactly. So I mean, I think – but we are committed to spending that level to maintain the quality that we have within the organization.

Systems and training of our people.

Look at it this way. We are really – we are fully staffed, all the departments are functioning well. And as the volume comes back and the revenue goes up, then it is just math.

Yes.

Got it. Great. Thank you.

The next question comes from Hamzah Mazari with Credit Suisse. Your line is open.

Thank you. First question, just how much of your volume improvement is coming from your competitive markets and what is price running at in those markets relative to your, call it, franchise markets, and how much of your residential business is tied to CPI again and in what particular regions?

Well, the residential business is about 70% CPI. And I think when you look at – now, we do have across the entire county CPI-based contracts, but there is a heavier weighting of the CPI in the south and – particularly in the southwest and west, where the franchises encompass all lines of business.

And so by the very nature, the franchise businesses are tied to more of a CPI index-type situation, Hamzah. And so you tend to get a little more pricing than in your open market opportunity.

Now, we have modeled CPI and the rollover of CPI quarter-by-quarter and we have some of the contracts that are anniversarying out. So as we look into the third, fourth quarter, well, the current CPI is a little bit lower. At least within this year quarter-by-quarter, we see some upticks in the second half there.

Okay. And just a follow-up question. You talked about normal seasonality returning on the volume side. Are you beginning to see any operating leverage in terms of incremental EBITDA margin flow through or is it just too early to tell and you need more of a bounce in volumes on both the industrial and the commercial side returning?

Yes, it's a little too early. So while we are seeing the year-over-year volume numbers decline, right – or the gaps decline, we are still negative year-over-year in volume, 3.3%. So we've got to get to a positive volume environment for volume (inaudible). That's when we will see that operating leverage and as we said in the comments, we expect to be coming at zero or a slight positive volume situation by –

But I mean, I think too that 370 basis points of improvement that we told you about in volume, all right, is not just the comp – not the volume comping out here. This is – we have seen some marginal increases in our small container business through service increases. We've seen our industrial permanent and as in Tod's – in Don's comments, we pointed out. And we are starting to see some increased landfill volumes, especially surrounding special waste. So we are seeing some improvement in the economy and we do believe that the business does have operating leverage in it going forward. But I think as Don said, it's just a little early to tell right now when we still really look at kind of earnings being almost 50-50 versus what – in a traditional year when we saw traditional seasonality, it was 48-50.

You mean, first half to second half?

Yes, of earnings. So I think – look at – we believe the economy is getting a little bit better. We believe that the business is – from a pricing perspective, is operating online. We will be at the lower end of our guidance in pricing by – for full year. So I mean, all in all, we just – I mean, I believe that this is a great quarter. And again, business is operating just as we saw it would, other than the idea that the CPI is – has got a headwind.

Great, makes sense. Thank you very much.

The next question comes from Jonathan Ellis with Banc of America/Merrill Lynch. Your line is open.

Thanks, guys.

Good afternoon, Jonathan.

Good afternoon. First question just on pricing, that's the topic that you are – can you just help us to understand in the second half of the year, what percentage of your revenue is going to be potentially impacted by any further fluctuations in CPI? My understanding is more of it is tied to the first half of the year, but can you help us understand exposure in the second half of the year? And then the related question there would be what your assumptions are for competitive versus index-based pricing for the second half of the year?

Well, I think the pricing – I'm thinking of some of our larger contracts, we have – for example Las Vegas, which is a – those contracts are July CPI we said, and some of the larger West Coast contracts are September. So I don't know that it's necessarily heavily weighted towards the first half of the year. I think it just depends on – we are going to get a little bit more CPI price in the second half, but that's really a function of that book of contracts that we have and how the terms were written and how they reset last year versus this year. So I – I don't necessarily have – I can't say two-thirds of our contracts are reset in the second half and one-third in the first half. I don't have that statistic.

So just to be clear, that means that theoretically you – we could see the same degree of volatility in the second half of the year if CPI fluctuates perhaps on the upside or the downside in the last six months?

Well, I think a lot of what we are going to see this year is pretty well set, now that we are halfway through the year. So as we analyze our contracts, we will get a little bit more CPIs priced in the second half of the year. I think the volatility, you bring a good point – the volatility, if CPI picks back up, then we will have a little bit more CPI if we roll into '11. So it's probably more of a '11 issue than it is a '10 issue.

Okay. And then just the second question on repurchases. I saw you obviously increased the dividend, but you are holding off on the – any clarification on repurchases? Help us understand why wait until November; why not provide us with some sense now as to what your repurchase plans are.

Well, I mean, I think it's – one, it's a process that we embarked upon early part of last year to start to review where we were in the integration and what the capabilities of the business were to generate significant amounts of free cash flow. I think the – the other thing is we've been clear that we are looking to announce a share repurchase to be effectuated in 2011 after we finished completion of our de-levering program. And so I think it's consistent with the way we've approached it and planned it that the Board will make the decision on share repurchase in the third quarter call. And I think we've been clear to say that in a number of conferences that we've been at. And the order of magnitude that we've been talking about the share repurchase to be is in the area of $300 million to $400 million to be acted on in the 2011 calendar year and probably, with a bias to the upper end of that.

Yes. So Jonathan, we will be paying down more debt here in the second half of this year and then making that – the Board will be looking at that as Jim indicated in November.

Great. Thanks, guys.

Next question comes from Vance Edelson with Morgan Stanley. Your line is open.

Hi, thank you. Regarding the targeted run rate for synergies by year-end, when we think about modeling out 2011, would it be reasonable to assume even more incremental synergies next year? And as part of the same question, maybe if you could provide an update specifically on automating your routes? I think in the past you've mentioned you are not quite way – quite halfway through that process.

Yes. Well, first of all, I think we have steadily moved the synergies up as we moved through the year and actually even last year. I think we are reaching sort of a plateau here. There might be a little bit of upside, but I think the business is pretty well integrating. By the end of probably October, we should be pretty much done with this. And you can also see that there is not a lot cost to achieve synergies. So the one – where we are at in second quarter maybe about $185 million run rate. I think our guidance is $185 million to $190 million and we will be at the $190 million probably as we wrap up this year. And we had talked in the past about some strategic projects, which the company is working on and we are actually spending P&L dollar today to focus on certain number of areas. But the benefits of those really come in probably in '12 and '13. So the whole synergy cycle and the cost to achieve synergy cycle really ends in December.

Yes. We will obviously talk more about those additional initiatives when we talk about 2011 guidance. As far as automation goes, we've got a plan coming together now. It's essentially a five-year plan to automate the remaining parts of our residential business that is automatable. And we are working that through, the priorities and as contracts come available to do that over the next five years and those will have bigger turns attached to them. So we are – we've got a lot of great success in that. So we are just going to continue to do that over the next five years.

All right. That's helpful. And as a quick follow-up, could you provide any insight into volume trends during the quarter and into July as the improvement has been fairly steady?

A little bit better in June, I think. But again, we are not about to declare a victory on the economy. But it was a little bit better in June.

And can you comment on July or is it the numbers aren’t in yet?

The only thing we can comment on July, it's July.

Yes, that's great.

I mean, the good news as well is we had seasonality that we didn't see last year. So that's again another good fact in the trend.

Got it. Thanks, guys.

Our next question comes from Corey Greendale with First Analysis. Your line is open.

Hi, good afternoon.

Good afternoon, Corey.

Hi, Corey.

So I had a question about the pricing. Can you just help us model the environmental fee increase, like what – how many basis points would that add to a pricing – reported pricing if that rolls out?

Well, it's about a 1% increase effective July 1st. So for the fiscal year, it's probably about 20 basis points full year.

Right. So when we talk about the lower end of our guidance, it's really we are still at about that 2% range or about 1.8% if you backed out the impact of the environmental fee that will take effect in July.

Okay, and –

20 basis points is the answer to your modeling question.

Okay, good. And then I realize that CPI – actually, correct me if this is wrong. But I think CPI-related volumes, those aren’t as much the more cyclical or incremental volumes as the economy recovers, but – again, correct me if that's wrong, but I think you said that you expect the margin on incremental volume as it returns to be in the range of 40%, 45%.

Yes, that's right.

And that's – presumably, that – there price is a variable in determining that. So I just want to kind of confirm that pricing is strong enough where we are right now that would – that you still think that's the case.

We still believe we are going to have – we will be or exceeding our guidance for EBITDA margins.

Right.

Which is 31%.

Right. And remember Corey, you know that incremental margin is a function of density, it's a function of capacity that we have in the system with some trucks that are parked from – we had several hundred trucks mothballed ready to go back into service. It's a function of – again, the SG&A discussion we had before, we are fully staffed, we don't have to add overhead to manage the new volume. So again, that incremental margin is a function of that. And as CPI pricing – remember, when we are in – CPI is lower and we are in a low-cost inflation situation as well. And as Jim said in his comments, the real key is that our pricing activities produce more revenue than our total cost inflation, right, to continue that margin expansion. And we've talked about getting anywhere from 50 BPs to 150 BPs of price in addition to inflation and we are successful in doing that. And that's the key and so that – well, CPI doesn't worry us overall and if CPI comes back and the inflation is good and we will see that build back. But I think we are in good place for next year.

Great. Thank you.

Next question is from Michael Hoffman with Wunderlich. Your line is open.

Thank you very much.

Good afternoon, Michael.

Hi, Michael.

The – hi, guys. How are you doing? To work – for the free cash flow guidance to work, you got to have a pretty big working capital swing in the second half. Can you tell us where the flexion is in that with what's going first half versus second half?

Yes, that's pretty straightforward. It's – first of all, with the seasonal uptick, our – I think you will see it in the Q; our receivables went up by about maybe $60 million, close to $900 million. So that's just – we are carrying higher receivables in the summer months. Typically that drops off in November and December in a more normal seasonal cycle. The other is, if you remember, at the end of last year our payables kind of spiked up in December and we paid a lot of cash out on payables. And so there is a normal cycle in payables also, which is another maybe $50 million or so. So I think those are a couple of the big items and it's really working capital. And as we look at the year again, CapEx, we think is going to be pretty much in line with our guidance. Again, we move the free cash flow up, consistent with where the earnings was going and I think depending on what happens with taxes, there has been some noise about bonus depreciation. I'm not sure Congress can get its act together on anything, but if they did, maybe we would have some further upside if bonus depreciation we'll put back in for 2010. So we feel very comfortable with that $725 million to $750 million. And we think we are in a very strong position from a cash flow standpoint, we will be de-levering through the end of this year and in a strong cash flow position next year.

Okay. Just – no, this isn't my second question; I just want to make sure I understood. The correction in the working capital –

Wait a second, Mike. Wait a second, now. This isn't your second question?

No, no. I just wanted to make sure I understand. The correction of working capital you are expecting in the fourth quarter, that's from modeling standpoint, right?

Yes. Well, that's why I think – the tax – (Multiple Speakers) couple of headwinds in the first half of the year.

Right. Okay and you are just targeting the fourth quarter for the correction, the big part of the correction, right?

When we speak to cash flows, we really speak to the full year. You get noise in there from tax payments; you get noise in there in terms of the timing of landfill construction, cell development, that sort of things.

It's always lumpy.

It's always lumpy. So really –

Okay.

We will have substantial debt pay down in the –

We got a tremendous amount of confidence in that – in that cash flow. (inaudible)

Okay. And then the share buyback, how is the – where is the rating agencies head about the dividend policy and the share buyback and will you not buy something back in December? I mean, if you started – announce it in November, you wouldn't buy anything in December?

Well, I think first –

This is Ed Lang.

– talk about the rating agencies, we've already discussed with them in recent annual update meetings what our plans were. And so they fully understand what the company plan is and support the ratings of the company. And so we are confident that we are in a good position from that perspective. And as far as timing, that's really a decision that the Board of Directors will make at the meeting in early November, and it might start in the late Q4, but it would be no later than Q1.

Okay, great.

Thank you. The next question comes from Al Kaschalk with Wedbush Securities. Your line is open.

Hi, guys. This is actually Kevin [ph] filling in for Al. Most of my questions have been answered, but just the follow-up on the volume, I guess, discussion. I see you guys saw some pretty good improvements in both commercial and special waste volumes. But were there specific regions in the country where most of that improvement came from or was it more kind of broad-based across the entire country?

Yes, I think we – again, probably similar to what we reported in the first quarter call, we saw anecdotal evidence of manufacturing and light industry improving in the Midwest and the Mid-Atlantic states, still not a strong recovery in the south and the west. And so that's where we are really seeing the upticks there. And again, those are good signs. In the special waste line of business, we are seeing still a very strong funnel. So we don't see any reason to anticipate any drop-off in special waste other – in fact, actually I think we would probably predict some acceleration.

Okay. I appreciate it. Thanks.

Thank you. That is all the time we have for questions today. I'll turn the call back over to Mr. O'Connor for his closing remarks.

Thank you, Holly. In summary, I am very pleased with our second quarter and our first half year results. I know that Don has already mentioned this, but I wanted to add my appreciation to the field organization and the management team here at corporate, for their extraordinary efforts through the integration process and for their excellent financial performance through the first half of 2010. I would like to remind everybody on the call that there is a recording that will be available through August 5th by calling 203-369-3404. Additionally, I want to point out that our SEC filings and a discussion of our business activities along with a recording of this call are available on Republic’s website at republicservices.com. And finally, I want to remind you that Republic's management team routinely participates in industrial conferences. When presentations are scheduled, the dates and times are posted on our website along with the instructions for listening to the web – the live webcast of the event. So with that, I would like to thank everyone for spending time with us today, and have a good evening.

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