Date: August 1, 2006
Source: Allied Waste Industries, Inc.
Record Internal Revenue Growth is Driven by 6% Increase in Pricing
Allied Waste Industries, Inc. (NYSE: AW), a leading waste services company, today reported financial results for the second quarter ended June 30, 2006. Allied Waste highlighted the following information from its reported financial results:
Internal revenue growth increased 7.8% over the prior year, driven by average price increases of 6.0% and average volume increases of 1.8%;
Operating income increased to $253 million compared to $248 million for the second quarter 2005, despite a $23 million increase in direct fuel costs;
Operating income before depreciation and amortization* increased to $400 million compared to $389 million for the second quarter 2005;
Diluted earnings per share was $0.08, including the $0.06 per share dilutive impact of refinancing costs, compared to $0.12 for the second quarter 2005; and
Cash flow from operations was $196 million, which includes $37 million of refinancing costs, compared to $230 million for the second quarter 2005.
"We are pleased with the results of the second quarter 2006, which continue to demonstrate the success and sustainability of our pricing and sales initiatives," said John Zillmer, Chairman and Chief Executive Officer. "Based upon the
results from the first half of the year, we are confident in achieving the middle of our range for 2006 operating income before depreciation and amortization* of $1.5 billion to $1.575 billion."
Revenue for the second quarter ended June 30, 2006 increased to $1.541 billion from $1.449 billion in the second quarter 2005. The increase in revenue resulted from internal growth of 7.8%, reflecting increases in all core lines of business, partially offset by a 1.4% decrease due to divestitures and lower non-core recycling revenue. Core internal revenue growth was comprised of a 6.0% increase in same store average unit price, which includes a 2.2% increase associated with a fuel recovery fee, and a 1.8%, increase in same-store volumes.
Gross profit before depreciation and amortization*, improved to $549 million from $506 million for the second quarter 2005 driven primarily by price increases, partially offset by increased direct and indirect fuel costs and increases in subcontractor costs associated with growth in the national accounts business. During the second quarter, the company recorded an $8 million reduction in environmental obligations primarily due to the selection by the U.S. Environmental Protection Agency of a lower cost remediation plan at one of the company's closed landfills. Additionally, insurance costs were reduced by $7 million as a result of changes in estimates due to favorable claims experience.
Operating income for the second quarter 2006 improved to $253 million from $248 million for the second quarter 2005 and operating income before depreciation and amortization* increased to $400 million, from $389 million in the second quarter of 2005. SG&A expenses increased by $31 million compared to the second quarter 2005, primarily due to a second quarter 2005 legal accrual reversal of $16 million, related to the favorable outcome of certain litigation during that period. On a sequential basis, SG&A costs were comparable to the first quarter 2006.
Interest expense increased to $174 million from $127 million in the second quarter 2005 primarily due to $41 million of costs incurred in connection with previously announced refinancing transactions. During the second quarter 2006, Allied Waste refinanced its $600 million 8 7/8% senior notes due April 2008, with a new issue of $600 million senior notes bearing an interest rate of 7 1/8% due 2016. This transaction extends maturities and lowers the interest rate resulting in an annual pre-tax net interest savings of $6 million. Additionally during the second quarter, Allied Waste re-priced portions of its credit facility reducing the interest rate on $1.8 billion of term loans and letter of credit facilities by 25 basis points, resulting in a pre-tax annual interest savings of $4 million.
Net income to common shareholders was $28 million, or $0.08 per share, which includes a $0.06 per share dilutive impact of refinancing costs, compared to $39 million, or $0.12 per share in the second quarter 2005. Additionally, during the second quarter 2006, Allied Waste's convertible preferred stock was converted into 34 million shares of common stock in an accretive transaction that eliminates annual cash dividend payments of $22 million.
Cash flow from operations in the second quarter 2006 was $196 million compared to $230 million in the second quarter 2005. The decrease in cash flow from operations was driven primarily by the refinancing costs. During the second quarter 2006, free cash flow* was $68 million, an increase from $37 million in the second quarter 2005.
Conference Call to be Held Today at 5:00 p.m. ET
Allied Waste will host a conference call related to the second quarter results on Tuesday, August 1st at 5:00 p.m. ET. The call will be broadcast live over the Internet on the Company's website: www.alliedwaste.com. A replay of the call will be available on the site after the call. In addition, the Company has filed supplemental data on Form 8-K that is accessible on the Company's website or through the SEC EDGAR System.
About Allied Waste Industries
Allied Waste Industries, Inc., a leading waste services company, provides collection, recycling and disposal services to residential, commercial and industrial customers in the United States. As of June 30, 2006, the Company operated a network of 304 collection companies, 162 transfer stations, 169 active landfills and 57 recycling facilities in 37 states and Puerto Rico.
For more information visit: www.alliedwaste.com.
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