Date: May 1, 2007
Source: Allied Waste Industries, Inc.
Allied Waste Industries, Inc. (NYSE: AW), a leading waste services company, today reported financial results for its first quarter ended March 31, 2007. Allied Waste highlighted the following information from its reported quarterly financial results:
- First quarter 2007 diluted earnings from continuing operations of $0.07
per share, inclusive of $26.7 million (after tax), or $0.07 per share,
of costs associated with debt refinancings. Excluding these
refinancing costs, first quarter diluted earnings* were $0.14 per
share. Prior year first quarter earnings were $0.08 per share;
- Internal revenue growth for the quarter of 3.1%, reflects an average
price increase of 5.9%, partially offset by a 2.8% decrease in volume
primarily related to roll-off, construction and special waste business;
- Operating income for the first quarter increased 13.9% to $235 million,
compared with $206 million in the prior year; quarterly operating
margins expanded by 160 basis points to 16.1%;
- During the quarter, Allied successfully refinanced $750 million of
Senior Notes and the revolving portion of its senior secured credit
facility resulting in expected interest savings of approximately
$15 million per year.
Results for the first quarter 2007 and all prior periods reflect the sale of Allied Waste's South Florida operations to Waste Services, Inc. As a result of this transaction, which closed on March 30, 2007, financial results for the South Florida operations are classified as discontinued operations. Allied's South Florida operations consisted of a collection company, a transfer station and a materials recovery facility that provided services in Miami-Dade County.
"Allied Waste is off to a strong start in 2007, as our results continued to benefit from company initiatives focused on improving profitability and driving better financial returns," said John Zillmer, Chairman and Chief Executive Officer. "Adjusting for costs associated with our debt refinancings, Allied's first quarter earnings increased 75% to $0.14 per share. The strength of Allied's first quarter results put the Company solidly on track with our expected full year outlook."
Revenue for the first quarter ended March 31, 2007, was $1.46 billion, an increase of $34 million, or 2.4%, from $1.42 billion in the first quarter 2006. The increase in revenue resulted from internal growth of 3.1%, comprised of a 5.9% increase in same store average unit price, including a 0.7% increase associated with a fuel recovery fee, partially offset by a 2.8% decrease in same-store volumes.
"Our first quarter results reflect the strength of the business environment and Allied's focus on improving pricing, while driving greater efficiencies throughout our operations," said Donald Slager, President and Chief Operating Officer.
Operating income for the quarter increased 13.9% to $234.9 million, compared with $206.2 million last year. Operating income as a percent of revenue increased 160 basis points to 16.1%, compared with 14.5% for the same period last year, as higher SG&A expenses were partially offset by lower depreciation and amortization costs. Gross profit* for the first quarter 2007 was $525.7 million, up $34.2 million, or 7.0%, over the comparable period last year. Gross profit as a percentage of revenue increased 160 basis points to 36.1%, reflecting the positive impact of higher prices in the period and lower costs resulting from reduced volumes and productivity initiatives that kept year-over-year operating costs comparable at $931 million.
First quarter income from continuing operations, inclusive of refinancing costs, was $34.4 million, compared with $39.9 million in the prior year. The Company incurred refinancing costs of $45.4 million, $26.7 million after tax, for fees and expenses associated with debt refinancings that were completed during the period. These costs were included in interest expense for the period. Excluding the impact of these costs, Allied would have reported income from continuing operations of $61.1 million, or $0.14 per share.
Cash flow from operations in the first quarter 2007 was $113.5 million, compared with $167.6 million in the comparable quarter last year. First quarter 2007 cash flow from operations includes debt refinancing costs and a greater outflow from working capital in comparison with prior year. Free cash flow* for the quarter was a net use of $87.3 million, a slight decrease in the use of cash from the prior year amount of $94.3 million.
Allied Waste has filed supplemental data on Form 8-K that is accessible on the Company's website or through the SEC EDGAR System.
Allied Waste will host a conference call related to the first quarter results on Tuesday, May 1, 2007, 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.
About Allied Waste Industries, Inc.
Allied Waste is America's second largest non-hazardous solid waste services company and an environmental leader. Headquartered in Phoenix, AZ, Allied Waste provides waste collection, transfer, recycling and disposal services to millions of residential, commercial and industrial customers in over 100 major markets spanning 37 states and Puerto Rico. Our team of 24,000 dedicated employees operates within a highly efficient, integrated organization that generated more than $6 billion of revenue in 2006.
Websites: alliedwaste.com and disposal.com.
*Information Regarding Use of Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with generally accepted accounting principles (GAAP), the Company also discloses gross profit before depreciation and amortization (revenue less cost of operations) which is used in computing gross margin, operating income before depreciation and amortization, divestitures and impairments, diluted income per share from continuing operations exclusive of debt refinancing costs and free cash flow, which are non-GAAP measures.
We believe that our presentation of gross profit before depreciation and amortization is useful to investors because it is an indicator of the strength and performance of our ongoing business operations, including the ability to grow revenue and manage the associated direct costs. While selling, general and administrative costs, depreciation and amortization and gain or loss from divestitures and asset impairments are considered components of operating income under GAAP, management uses gross profit before depreciation and amortization to evaluate business growth and the efficiency of our operations. Following is a reconciliation of gross profit before depreciation and amortization to operating income (in millions):
Three Months
Ended March 31,
2007 2006
Gross profit before depreciation
and amortization $525.7 $491.5
Less: Selling, general and
administrative expenses (162.0) (144.5)
Less: Depreciation and amortization (129.7) (140.8)
Add: Gain from divestitures and
asset impairments 0.9 --
Operating income $234.9 $206.2
We believe that our presentation of operating income before depreciation and amortization, divestitures and impairments is useful to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund capital expenditures and our ability to incur and service debt. While depreciation and amortization are considered operating costs under GAAP, these expenses are non-cash and primarily represent the allocation of costs associated with long-lived assets acquired or constructed in prior years. Management uses operating income before depreciation and amortization to evaluate the operations of our geographic operating regions. Following is a reconciliation of operating income before depreciation and amortization, divestitures and impairments to operating income (in millions):
Three Months
Ended March 31,
2007 2006
Operating income before depreciation and
amortization, divestitures and impairments $363.7 $347.0
Add: Gain from divestitures and
asset impairments 0.9 --
Operating income before depreciation
and amortization 364.6 347.0
Less: Depreciation and amortization (129.7) (140.8)
Operating income $234.9 $206.2
We believe our presentation of diluted income per share from continuing operations exclusive of debt refinancing costs provides an understanding of operational activities before the financial impact of refinancing decisions made for the long-term benefit of the company. Management uses this measure, and believes investors find it helpful, in understanding the ongoing performance of operations separate from refinancing charges that have a disproportionate impact on the results for a particular period. Comparable costs have been incurred in prior periods, and similar types of adjustments can reasonably be expected to be recorded in future periods:
Three Months
Ended March 31,
2007 2006
Diluted income per share from
continuing operations $0.07 $0.08
Add: Debt refinancing costs per share 0.07 --
Diluted income per share from continuing
operations exclusive of debt refinancing costs $0.14 $0.08
Free cash flow is defined as cash flow from operations, including the impact of the change in disbursements account, which is reflected in financing activities, less capital expenditures, plus proceeds from fixed asset sales and transaction related refinancing charges. Management believes the presentation of free cash flow is useful to investors because it allows them to better assess and understand the Company's ability to meet debt service requirements and the amount of recurring cash generated from operations after expenditures for fixed assets. Free cash flow does not represent the Company's residual cash flow available for discretionary expenditures since we have mandatory debt service requirements and other required expenditures that are not deducted from free cash flow. Free cash flow does not capture debt repayment and/or the receipt of proceeds from the issuance of debt. We use free cash flow as a measure of recurring operating cash flow. The most directly comparable GAAP measure to free cash flow is cash provided by operating activities from continuing operations.
Following is a reconciliation of free cash flow to cash provided by operating activities from continuing operations (in millions):
Three Months
Ended March 31,
2007 2006
Free cash flow $(87.3) $(94.3)
Add: Capital expenditures 223.8 195.7
Add: Change in disbursement account 26.2 70.1
Less: Premium on debt repurchases (45.4) --
Less: Proceeds from sale of fixed assets (3.8) (3.9)
Cash provided by operating activities
from continuing operations $113.5 $167.6
Allied does not intend for these non-GAAP financial measures to be considered in isolation or as a substitute for GAAP measures. Other companies may define these measures differently.
ALLIED WASTE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in millions, except per share data and percentages)
(unaudited)
For the Three For the Three
Months Ended Months Ended
March 31, % of March 31, % of
2007 Revenues 2006 (C) Revenues
Revenue $1,456.7 100.0% $1,422.8 100.0%
Cost of operations 931.0 63.9% 931.3 65.5%
Selling, general and
administrative expenses 162.0 11.1% 144.5 10.2%
Depreciation and
amortization 129.7 8.9% 140.8 9.8%
Gain from divestitures and
asset impairments (A) (0.9) (0.0)% -- --%
Operating income 234.9 16.1% 206.2 14.5%
Interest expense and other (B) 172.4 11.8% 132.5 9.3%
Income before income taxes 62.5 4.3% 73.7 5.2%
Income tax expense 28.2 1.9% 34.2 2.4%
Minority interests (0.1) (0.0)% (0.4) (0.0)%
Income from continuing
operations 34.4 2.4% 39.9 2.8%
Discontinued operations,
net of tax (C) 5.5 0.3% 1.3 0.1%
Net income 39.9 2.7% 41.2 2.9%
Dividends on Series C
Preferred Stock -- --% (5.4) (0.4)%
Dividends on Series D
Preferred Stock (9.4) (0.6)% (9.3) (0.6)%
Net income available to
common shareholders $30.5 2.1% $26.5 1.9%
Weighted average common
and common equivalent
shares 370.4 333.5
Diluted income per share
from continuing
operations $0.07 $0.08
Diluted income per share $0.08 $0.08
(A) Gain from divestitures and asset impairments for 2007 of $0.9 million
(or $0.00 per share) related to asset sales completed as a result of
our market rationalization focus.
(B) Interest expense and other for 2007 includes $45.4 million (or $0.07
per share) related to the write-off of deferred financing costs and
premiums paid in conjunction with the early repayment of debt.
(C) Discontinued operations includes the sale of certain operations in
Florida during the first quarter of 2007. The prior period results
of operations have been reclassified to include these operations as
discontinued operations. Included in the 2007 discontinued
operations is $1.7 million of net income and a $3.8 million gain from
the sale of those operations.
For more information, contact:
James P. Zeumer
Senior Vice President, Public Affairs, Communications and Investor Relations
Allied Waste Industries, Inc.
480-627-2785
www.alliedwaste.com.
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