Date: February 14, 2008
Source: Allied Waste Industries, Inc.
-- Reported Q4 Earnings Climb to $0.27 Per Share
-- Strong Pricing Drives Q4 Revenue to Over $1.5 Billion
-- Q4 Gross Margins* Expand 180 Basis Points to 38.6%
-- Full Year Free Cash Flow* Up 92% to $479 Million
-- 2008 Outlook Shows Continued Strong Financial Gains
Allied Waste Industries, Inc. (NYSE: AW), the nation's second largest waste services company, today reported financial results for its fourth quarter and year-ended December 31, 2007. For the quarter, income from continuing operations was $117.6 million, or $0.27 per diluted share, inclusive of a tax benefit of $0.03 per share. Prior year earnings from continuing operations of $8.2 million, or $0.00 per diluted share, include charges totaling $0.17 per share associated with tax related matters, divestitures and asset impairments. For the quarter, adjusted earnings per share from continuing operations increased 41% over the prior year.
Total revenue for the fourth quarter was $1.52 billion, an increase of $54.8 million, or 3.7%, over prior year revenue of $1.47 billion. Higher revenue for the quarter was driven by a 5.7% increase in average price as the Company continued to benefit from ongoing implementation of its strategic pricing program. In addition, the Company's fuel recovery fee increased 50 basis points in the fourth quarter compared with the prior year which reflects the impact of higher diesel fuel costs. Higher prices for the period were partially offset by a 3.8% decrease in volumes related primarily to the continued slowing of the economy.
"This past year saw an acceleration in key business performance measures including earnings growth, margin expansion, cash flow generation and, in turn, debt reduction," said John Zillmer, Chairman and Chief Executive Officer. "By strengthening our core capabilities, we have been able to deliver excellent financial results, while building an operating and financial platform that supports the future growth of Allied Waste."
Gross profit* for the quarter was $586.7 million, up $47.0 million, or 8.7%, over the comparable period last year. Gross profit as a percentage of revenue increased to 38.6%. The 180 basis point expansion in gross margins reflects the positive impact of higher prices, the systematic elimination of low-margin business and the Company's continued success in flexing down costs in response to lower volumes. Operating income for the quarter increased 17.6% to $294.6 million, compared with $250.5 million last year. Fourth quarter operating income as a percent of revenue was 19.4%, an increase of 230 basis points over the same period last year.
Fourth quarter cash flow from operations was $324.3 million, compared with $289.8 million in the prior year, as the quarter benefited from higher operating income, partially offset by changes in working capital. Free cash flow* for the quarter gained 14.0% to $164.2 million, as increased cash flow from operations was partially offset by higher capital expenditures. Free cash flow for the full year increased 92% to $479.0 million, compared with $250.1 million for the prior year, resulting primarily from the strong increase in operating income and favorable changes in working capital.
For the year ended December 31, 2007, Allied Waste's revenue was $6.07 billion, an increase of $160.2 million, or 2.7%, over prior year. Continued strong pricing for the year of 6.0% was partially offset by a 3.5% decline in annual volumes driven primarily by a slowdown in housing construction.
Operating income for the year increased 10.6% to $1.06 billion, as operating margins expanded 120 basis points to 17.4%. Income from continuing operations in 2007 doubled to $309.8 million, compared with 2006 income of $155.8 million. Reported 2007 earnings from continuing operations increased to $0.71 per diluted share, inclusive of approximately $0.14 per share in charges associated with asset sales, impairments and refinancing costs, partially offset by $0.05 per share in tax benefits. Prior year reported earnings from continuing operations of $0.32 per diluted share were reduced by approximately $0.27 per share from costs related to impairments, losses on asset sales, refinancing costs and certain tax expenses.
Allied Waste ended the year with debt, net of cash, of $6.4 billion, down $404.5 million from 2006, and a debt-to-total capital ratio of 63.0%, which was a 280 basis point improvement from the prior year. Subsequent to the close of the year, the Company used accumulated cash to retire $161.2 million of outstanding senior notes, which matured on January 15, 2008.
2008 Outlook
"The strong business performance achieved in 2007 reflects the continued success of key programs designed to strengthen our core capabilities and drive greater operating efficiency," said Mr. Zillmer. "Our success in 2007 has put the Company in a strong position heading into what is forecast to remain a challenging economic environment. This strong market position, combined with actions already in progress to further reduce our costs, should enable us to deliver improved financial results in 2008, while continuing to advance our strategic pricing, customer service and people development initiatives."
Based on its 2007 financial results and expectations for the year ahead, Allied Waste announced the following outlook for 2008:
-- Revenue growth of approximately 1.5% to 3.0%, comprised of price growth of approximately 4.5%, partially offset by a potential decrease in annual volume of 1.5% to 3.0%;
-- Operating income in the range of $1.145 billion to $1.185 billion;
-- Depreciation and amortization of approximately $575 million;
-- Free cash flow* of approximately $400 million (excluding tax payments noted below);
-- Capital expenditures of approximately $650 million; and
-- Dividends on preferred stock of $9.4 million, based on the mandatory conversion of this security on March 1, 2008.
As part of its outlook, the Company also noted that in 2008 it expects to pay taxes and interest of approximately $315 million, net of tax benefit, associated with its BFI-related tax dispute and other state tax matters. With interest accruing on these matters at a statutory rate of up to 9%, compared with the Company's incremental borrowing rate of less than 5% today, the Company sees a clear economic benefit to opportunistically taking this action in 2008. Making the payments does not in any way change the Company's legal position.
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 fourth quarter results on Thursday, February 14, 2008, 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 markets spanning 37 states and Puerto Rico. Our team of more than 23,000 dedicated employees operates within a highly efficient, integrated organization that generated 2007 revenue of $6.1 billion.
Websites: www.alliedwaste.com and www.disposal.com
* Information regarding use of non-GAAP financial measures may be found in the accompanying schedules.
Safe Harbor for Forward-Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including in the section entitled "2008 Outlook". The words "should", "forecast", "expectations" and similar words and phrases are used in this press release to identify the forward-looking statements. These forward-looking statements, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual results, events or conditions to differ materially from those expressed or implied by the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that the expectations will prove to be correct.
The forward-looking statements in this press release relate to our anticipated financial results for 2008, including revenues, operating income, depreciation and amortization, free cash flow and capital expenditures. Among the factors that could cause actual results to differ materially from the expectations expressed in the forward-looking statements are: (1) the general political and economic conditions in the United States, negative changes in which could (a) make it more difficult for us to predict economic trends, (b) cause a decline in the demand for our services (particularly in the commercial and industrial sectors), (c) cause a decline in the price of commodities sold by us or (d) increase competitive pressure on pricing; (2) the overall competitive nature of the waste management industry, which could cause pressure on pricing and the loss of business; (3) our ability or inability to successfully identify and integrate acquired businesses and any liabilities associated with acquired businesses, which could impact our costs; (4) our ability or inability to implement market development initiatives, pass on increased costs to customers, execute operational improvement plans and divest under-performing assets, and to realize the anticipated benefits of these initiatives; (5) our ability or inability to generate revenue growth and offset the impact of inflation and business growth on our costs through price increases, including the potential impact of price increases on volumes; (6) changes in capital availability or costs, which, among other things, could affect our financial results due to our variable interest rate debt; (7) severe weather conditions, which could impair our financial results by causing increased costs, loss of revenue, reduced operational efficiency or disruptions to our operations; (8) our ability to operate our business as we desire, which may be limited by restrictive covenants in our debt agreements, our ability to obtain required permits on a timely basis (or at all), regulatory requirements and other factors; (9) compliance with existing and future legal and regulatory requirements, including limitations or bans on disposal of certain types of wastes or on the transportation of waste, which could limit our ability to conduct or grow our business, increase our costs to operate or require additional capital expenditures; (10) changes in site remediation requirements or our estimates of the costs to comply with existing requirements, which could increase our costs, including costs for final capping, closure, post-closure and other remediation obligations; (11) the outcome of existing and any future legal proceedings, including any litigation, audit or investigation brought by or before any governmental body, which could result in increased costs or restrictions on our ability to operate; (12) environmental liabilities in excess of our reserves or insurance coverage, if any; (13) increases in the costs in commodity, insurance, oil and fuel prices that make it more expensive to operate our business, including our ability or inability to reduce the impact of any such cost increases through cost reduction initiatives and other methods; (14) workforce factors, including potential increases in our costs if we are required to provide additional funding to any multi-employer pension plan to which we contribute and the negative impact on our operations of union organizing campaigns, work stoppages or labor shortages; (15) the negative effect that trends toward requiring recycling, waste reduction at the source and prohibiting the disposal of certain types of wastes could have on volumes of waste going to landfills and waste-to-energy facilities; (16) changes by the Financial Accounting Standards Board or other accounting regulatory bodies to generally accepted accounting principles or policies; (17) acts of war, riots or terrorism, including the events taking place in the Middle East, the current military action in Iraq and the continuing war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism, and the impact of these acts on economic, financial and social conditions in the United States; and (18) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond our control.
Other factors which could materially affect our forward-looking statements can be found in the Company's periodic reports filed with the Securities and Exchange Commission, including risk factors detailed in Item 1A, "Risk Factors" in our Form 10-K for the year ended December 31, 2006. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating our forward-looking statements and are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances.
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
December 31, % of December 31, % of
2007 Revenues 2006 Revenues
Revenue $1,520.3 100.0 % $1,465.5 100.0 %
Cost of operations 933.6 61.4 % 925.8 63.2 %
Selling, general and
administrative expenses 151.2 9.9 % 146.2 10.0 %
Depreciation and
amortization 140.9 9.3 % 135.0 9.2 %
Loss from divestitures and
asset impairments (A) -- -- % 8.0 0.5 %
Operating income 294.6 19.4 % 250.5 17.1 %
Interest expense and other 114.0 7.5 % 129.0 8.8 %
Income before income
taxes 180.6 11.9 % 121.5 8.3 %
Income tax expense (B) 63.0 4.2 % 113.2 7.7 %
Minority interests -- -- % 0.1 0.0 %
Income from continuing
operations 117.6 7.7 % 8.2 0.6 %
Discontinued operations,
net of tax (2.3) (0.1)% 1.6 0.1 %
Net income 115.3 7.6 % 9.8 0.7 %
Dividends on Series D
Preferred Stock (9.4) (0.6)% (9.4) (0.7)%
Net income available to
common shareholders $105.9 7.0 % $0.4 0.0 %
Weighted average common and
common equivalent shares 443.4 369.7
Diluted income per share
from continuing operations $0.27 $0.00
Diluted income per share $0.26 $0.00
(A) Loss from divestitures and asset impairments for 2006 includes
$8.0 million (or $0.01 per share) primarily related to a decision to
discontinue development and/or operations at two landfill sites and
the relocation of the Company's operations support center.
(B) Income tax expense for 2007 includes a $14.9 million benefit (or $0.03
per share) including $7.3 million for the reversal of previously
accrued interest expense associated with uncertain tax matters as a
result of favorable resolution during the period and $7.6 million
relating primarily to state tax adjustments. Income tax expense for
2006 includes $58.2 million of expense (or $0.16 per share)
consisting of: $21.5 million of interest charges on previously
recorded liabilities under review by the applicable taxing
authorities, $13.4 million in adjustments relating to state tax
matters attributable to prior years, a $12.0 million increase in our
valuation allowance for state net operating loss carry-forwards, and
$11.3 million relating primarily to adjustments of state income taxes.
* In mid-February 2008, we realigned our organizational structure and
reduced the number of our geographic regions from five to four.
Future filings, which include results for 2008, will reflect segment
information for these four geographic regions.
ALLIED WASTE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS *
(amounts in millions, except per share data and percentages)
(unaudited)
For the Twelve For the Twelve
Months Ended Months Ended
December 31, % of December 31, % of
2007 Revenues 2006 Revenues
Revenue $6,068.7 100.0 % $5,908.5 100.0 %
Cost of operations 3,787.1 62.4 % 3,786.4 64.1 %
Selling, general and
administrative expenses 631.9 10.4 % 587.3 9.9 %
Depreciation and
amortization 553.5 9.1 % 557.7 9.4 %
Loss from divestitures and
asset impairments (A) 40.5 0.7 % 22.5 0.4 %
Operating income 1,055.7 17.4 % 954.6 16.2 %
Interest expense and
other (B) 538.4 8.9 % 563.4 9.6 %
Income before income
taxes 517.3 8.5 % 391.2 6.6 %
Income tax expense (C) 207.1 3.4 % 235.3 4.0 %
Minority interests 0.4 0.0 % 0.1 0.0 %
Income from continuing
operations 309.8 5.1 % 155.8 2.6 %
Discontinued operations,
net of tax (D) (36.2) (0.6)% 5.1 0.1 %
Net income 273.6 4.5 % 160.9 2.7 %
Dividends on Series C
Preferred Stock -- -- % (5.4) (0.1)%
Dividends on Series D
Preferred Stock (37.5) (0.6)% (37.5) (0.6)%
Net income available to
common shareholders $236.1 3.9 % $118.0 2.0 %
Weighted average common and
common equivalent shares 443.0 359.3
Diluted income per share
from continuing operations $0.71 $0.32
Diluted income per share $0.63 $0.33
(A) Loss from divestitures and asset impairments for 2007 includes
$16.0 million (or $0.03 per share) of loss on divestiture primarily
related to a landfill sale in the Southeastern region and
$24.5 million (or $0.03 per share) of asset impairment charge
associated with a landfill in the Midwestern region resulting from
changes in anticipated long-term closure and post-closure costs. Loss
from divestitures and asset impairments for 2006 includes
$22.5 million (or $0.04 per share) primarily related to a decision to
discontinue development and/or operations at three landfill sites,
asset sales completed as a result of our market rationalization focus
and the relocation of the company's operations support center.
(B) Interest expense and other for 2007 and 2006 includes $59.6 million
(or $0.08 per share) and $41.3 million (or $0.07 per share),
respectively, related to the write-off of deferred financing costs and
premiums paid in conjunction with the early repayment of debt.
(C) Income tax expense for 2007 includes a $24.6 million benefit (or $0.05
per share) including $17.0 million for the reversal of previously
accrued interest expense associated with uncertain tax matters as a
result of favorable resolution during the year and $7.6 million
relating primarily to state tax adjustments. Income tax expense for
2006 includes $58.2 million (or $0.16 per share) consisting of:
$21.5 million of interest charges on previously recorded liabilities
under review by the applicable taxing authorities, $13.4 million in
adjustments relating to state tax matters attributable to prior years,
a $12.0 million increase in our valuation allowance for state net
operating loss carry-forwards, and $11.3 million relating primarily to
adjustments of state income taxes.
(D) Discontinued operations includes the sale of certain operations in the
Midwestern and Southeastern regions in 2007. The prior period
results of operations have been reclassified to include these
operations as discontinued operations. Included in the 2007
discontinued operations are $1.8 million of income from operations and
a $38.0 million loss, net of tax, from the sale of those operations.
* In mid-February 2008, we realigned our organizational structure and
reduced the number of our geographic regions from five to four.
Future filings, which include results for 2008, will reflect segment
information for these four geographic regions.
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
STATEMENT OF OPERATIONS DATA
(amounts in millions, except percentages and tons data)
(unaudited)
For the Three Months Ended
December 31,
2007 2006
Revenue --
Gross revenue $1,831.9 $1,783.1
Less intercompany revenue (311.6) (317.6)
Net Revenue $1,520.3 $1,465.5
Revenue Mix (based on net revenue) --
Collection --
Residential $302.1 $298.2
Commercial 394.6 369.6
Roll-off 320.8 316.0
Recycling 55.0 48.2
Total Collection 1,072.5 1,032.0
Disposal --
Landfill (net of $180.7 and $186.4 of
intercompany) 208.3 205.4
Transfer (net of $94.4 and $98.4 of
intercompany) 105.4 103.1
Total Disposal 313.7 308.5
Recycling - Commodity 66.3 53.6
Other 67.8 71.4
Total $1,520.3 $1,465.5
Internalization Based on Disposal
Volumes 73 % 73 %
Landfill Volumes in Thousands of Tons 17,984 18,899
Year over Year Internal Growth
(excluding commodity) --
Average per unit price change 6.2 % 4.6 %
Volume change (3.8)% (0.5)%
Total 2.4 % 4.1 %
Year over Year Internal Growth 2.7 % 3.9 %
(including commodity)
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
STATEMENT OF OPERATIONS DATA
(amounts in millions, except percentages and tons data)
(unaudited)
For the Twelve Months Ended
December 31,
2007 2006
Revenue --
Gross revenue $7,344.1 $7,202.9
Less intercompany revenue (1,275.4) (1,294.4)
Net Revenue $6,068.7 $5,908.5
Revenue Mix (based on net revenue) --
Collection --
Residential $1,201.6 $1,190.0
Commercial 1,535.5 1,457.0
Roll-off 1,290.3 1,304.5
Recycling 210.2 189.8
Total Collection 4,237.6 4,141.3
Disposal --
Landfill (net of $742.1 and $759.0 of
intercompany) 832.7 839.2
Transfer (net of $391.0 and $405.2 of
intercompany) 436.0 423.1
Total Disposal 1,268.7 1,262.3
Recycling - Commodity 257.2 212.2
Other 305.2 292.7
Total $6,068.7 $5,908.5
Internalization Based on Disposal
Volumes 73 % 73 %
Landfill Volumes in Thousands of Tons 73,203 77,462
Year over Year Internal Growth
(excluding commodity) --
Average per unit price change 6.0 % 5.7 %
Volume change (3.5)% 1.1 %
Total 2.5 % 6.8 %
Year over Year Internal Growth
(including commodity) 3.0 % 6.4 %
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
STATEMENT OF OPERATIONS DATA
(amounts in millions, except percentages)
(unaudited)
The following tables provide the components of our operating costs and as a percentage of revenues:
Three Months Ended December 31,
2007 2006
Labor and related benefits $269.3 17.7 % $262.7 17.9 %
Transfer and disposal costs 115.9 7.6 114.1 7.8
Maintenance and repairs 117.7 7.7 121.4 8.3
Transportation and subcontractor
costs 120.8 7.9 122.2 8.3
Fuel 87.3 5.7 67.6 4.6
Disposal and franchise fees and
taxes 89.6 5.9 90.8 6.2
Landfill operating costs 39.0 2.6 38.0 2.6
Risk management 33.6 2.2 46.6 3.2
Costs of goods sold 17.7 1.2 13.6 0.9
Other 42.7 2.9 48.8 3.4
Total operating expenses $933.6 61.4 % $925.8 63.2 %
Twelve Months Ended December 31,
2007 2006
Labor and related benefits $1,078.9 17.8 % $1,092.0 18.5 %
Transfer and disposal costs 452.5 7.5 475.3 8.0
Maintenance and repairs 482.5 8.0 491.5 8.3
Transportation and subcontractor
costs 505.8 8.3 507.4 8.6
Fuel 308.7 5.1 291.6 4.9
Disposal and franchise fees and
taxes 362.0 6.0 365.5 6.2
Landfill operating costs 162.1 2.7 148.0 2.5
Risk management 154.1 2.5 166.0 2.8
Costs of goods sold 73.9 1.2 54.3 0.9
Other 206.6 3.3 194.8 3.4
Total operating expenses $3,787.1 62.4 % $3,786.4 64.1 %
The following tables provide the components of our selling, general and administrative costs and as a percentage of revenues:
Three Months Ended December 31,
2007 2006
Salaries $104.3 6.9 % $85.8 5.8 %
Rent and office costs 9.7 0.6 8.6 0.6
Professional fees 12.3 0.8 14.9 1.0
Provision for doubtful accounts 2.2 0.1 5.0 0.3
Other 22.7 1.5 31.9 2.3
Total selling, general and
administrative expenses $151.2 9.9 % $146.2 10.0 %
Twelve Months Ended December 31,
2007 2006
Salaries $396.4 6.5 % $358.7 6.1 %
Rent and office costs 39.2 0.6 40.3 0.7
Professional fees 64.8 1.1 56.9 1.0
Provision for doubtful accounts 19.9 0.3 18.3 0.3
Other 111.6 1.9 113.1 1.8
Total selling, general and
administrative expenses $631.9 10.4 % $587.3 9.9 %
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
BALANCE SHEET
(amounts in millions, except per share data)
(unaudited)
December 31, December 31,
2007 2006
ASSETS
Current assets --
Cash and cash equivalents $230.9 $94.1
Restricted cash 26.1 --
Accounts receivable, net of allowance of
$21.2 and $18.4 691.0 687.5
Prepaid and other current assets 81.9 93.6
Deferred income taxes 128.3 172.5
Total current assets 1,158.2 1,047.7
Property and equipment, net 4,430.4 4,258.7
Goodwill 8,020.0 8,126.0
Other assets, net 340.1 378.6
Total assets $13,948.7 $13,811.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities --
Current portion of long-term debt $557.3 $236.6
Accounts payable 496.8 494.4
Current portion of accrued capping,
closure, post-closure and
environmental costs 96.0 95.8
Accrued interest 99.6 106.9
Other accrued liabilities 757.7 369.8
Unearned revenue 239.7 229.2
Total current liabilities 2,247.1 1,532.7
Long-term debt, less current portion 6,085.6 6,674.0
Deferred income taxes 400.3 357.3
Accrued capping, closure, post-closure
and environmental costs, less
current portion 771.4 760.3
Other long-term obligations 540.1 887.8
Stockholders' equity --
Series D senior mandatory convertible
preferred stock, $0.10 par value,
2.8 million shares authorized, 2.4 million
shares issued and outstanding, liquidation
preference of $250.00 per share, net of
$19.2 million of issuance costs 580.8 580.8
Common stock 3.7 3.7
Additional paid-in capital 2,843.3 2,802.0
Accumulated other comprehensive loss (29.5) (57.4)
Retained earnings 505.9 269.8
Total stockholders' equity 3,904.2 3,598.9
Total liabilities and stockholders'
equity $13,948.7 $13,811.0
Days sales outstanding 43 days 43 days
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
STATEMENT OF CASH FLOWS
(amounts in millions)
(unaudited)
For the Three For the Three
Months Ended Months Ended
December 31, December 31,
2007 2006
Operating activities --
Net income $115.3 $9.8
Discontinued operations, net of tax 2.3 (1.6)
Adjustments to reconcile net income to
cash provided by operating activities
from continuing operations --
Provisions for:
Depreciation and amortization 140.9 135.0
Stock-based compensation expense 5.9 (4.9)
Doubtful accounts 2.2 5.0
Accretion of debt and amortization of
debt issuance costs 5.1 5.4
Deferred income tax expense 49.7 104.4
Gain on sale of fixed assets (13.1) (5.3)
Loss from divestitures and asset
impairments -- 8.0
Write-off of deferred debt issuance
costs 0.4 0.4
Other non-cash items (7.9) (2.8)
Change in operating assets and
liabilities, excluding the effects
of acquisitions --
Accounts receivable, prepaid expenses,
inventories and other assets 45.0 36.6
Accounts payable, accrued liabilities,
unearned income and other 3.2 21.0
Capping, closure and post-closure
accretion 11.7 12.0
Capping, closure, post-closure and
environmental expenditures (36.4) (33.2)
Cash provided by operating activities from
continuing operations 324.3 289.8
Investing activities --
Cost of acquisitions, net of cash
acquired (10.6) --
Proceeds from divestitures, net of
cash divested 0.1 4.3
Proceeds from sale of fixed assets 13.8 10.7
Capital expenditures, excluding
acquisitions (173.9) (156.5)
Capitalized interest (4.9) (4.6)
Change in deferred acquisition costs,
notes receivable and other -- (1.1)
Cash used for investing activities from
continuing operations (175.5) (147.2)
Financing activities --
Proceeds from long-term debt, net of
issuance costs 123.1 1.8
Payments of long-term debt (135.6) (132.2)
Payments of preferred stock dividends (9.4) (9.5)
Net receipts from restricted trust 40.2 --
Net proceeds from sale of common
stock, exercise of stock
options and other 2.3 11.5
Cash provided by (used for) financing
activities from continuing operations 20.6 (128.4)
Cash provided by (used for) discontinued
operations (6.0) 2.8
Increase in cash and cash equivalents 163.4 17.0
Cash and cash equivalents, beginning of
period 67.5 77.1
Cash and cash equivalents, end of period $230.9 $94.1
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
STATEMENT OF CASH FLOWS
(amounts in millions)
(unaudited)
For the Twelve For the Twelve
Months Ended Months Ended
December 31, December 31,
2007 2006
Operating activities --
Net income $273.6 $160.9
Discontinued operations, net of tax 36.2 (5.1)
Adjustments to reconcile net income to
cash provided by operating activities
from continuing operations --
Provisions for:
Depreciation and amortization 553.5 557.7
Stock-based compensation expense 21.6 10.5
Doubtful accounts 19.9 18.3
Accretion of debt and amortization of
debt issuance costs 20.5 21.8
Deferred income tax expense 161.4 202.5
Gain on sale of fixed assets (20.8) (9.9)
Loss from divestitures and asset
impairments 40.5 22.5
Write-off of deferred debt issuance
costs 7.6 4.1
Other non-cash items (10.1) (16.3)
Change in operating assets and
liabilities, excluding the effects
of acquisitions --
Accounts receivable, prepaid expenses,
inventories and other assets (14.0) (35.5)
Accounts payable, accrued liabilities,
unearned income and other (1.7) (43.3)
Capping, closure and post-closure
accretion 53.2 48.8
Capping, closure, post-closure and
environmental expenditures (75.2) (84.7)
Cash provided by operating activities from
continuing operations 1,066.2 852.3
Investing activities --
Cost of acquisitions, net of cash
acquired (85.6) (10.7)
Proceeds from divestitures, net of
cash divested 166.3 61.1
Proceeds from sale of fixed assets 25.8 21.7
Capital expenditures, excluding
acquisitions (670.0) (661.1)
Capitalized interest (19.2) (17.2)
Change in deferred acquisition costs,
notes receivable and other -- 4.6
Cash used for investing activities from
continuing operations (582.7) (601.6)
Financing activities --
Proceeds from long-term debt, net of
issuance costs 1,502.2 1,239.3
Payments of long-term debt (1,914.1) (1,438.4)
Payments of preferred stock dividends (37.5) (48.3)
Net receipts from restricted trust 90.7 --
Net proceeds from sale of common
stock, exercise of stock options and other 23.9 23.6
Cash used for financing activities from
continuing operations (334.8) (223.8)
Cash provided by (used for) discontinued
operations (11.9) 11.1
Increase in cash and cash equivalents 136.8 38.0
Cash and cash equivalents, beginning of
period 94.1 56.1
Cash and cash equivalents, end of period $230.9 $94.1
ALLIED WASTE INDUSTRIES INC.
SUMMARY DATA SHEET
FREE CASH FLOW DATA
(amounts in millions)
(unaudited)
For the Three For the Twelve
Months Ended Months Ended
December 31, December 31,
2007 2006 2007 2006
Free Cash Flow:
Cash provided by operating
activities $324.3 $289.8 $1,066.2 $852.3
Add: Premium on debt
repurchases -- -- 57.0 37.2
Proceeds from sale of
fixed assets 13.8 10.7 25.8 21.7
Less: Capital expenditures,
excluding acquisitions (173.9) (156.5) (670.0) (661.1)
Free cash flow 164.2 144.0 479.0 250.1
Market development and other
investing activities, net (10.5) 3.2 80.7 55.0
Cash provided by (used for)
discontinued operations (6.0) 2.8 (11.9) 11.1
Capitalized interest (4.9) (4.6) (19.2) (17.2)
Debt issuance costs (1.2) -- (21.9) (11.7)
Payments on preferred stock
dividends (9.4) (9.5) (37.5) (48.3)
Premium on debt repurchases -- -- (57.0) (37.2)
Accretion and other 0.8 9.9 18.4 17.3
Change in cash (including
restricted cash) (163.2) (17.0) (162.9) (38.0)
(Increase) decrease in debt $(30.2) $128.8 $267.7 $181.1
Debt balance at
beginning of period $6,612.7 $7,039.4 $6,910.6 $7,091.7
(Increase) decrease in debt (30.2) 128.8 267.7 181.1
Debt balance at end
of period $6,642.9 $6,910.6 $6,642.9 $6,910.6
DILUTED EARNINGS PER SHARE COMPUTATION
(amounts in millions, except per share data)
(unaudited)
For the Three For the Twelve
Months Months
Ended December Ended December
31, 31,
2007 2006 2007 2006
Diluted earnings per share
computation:
Income from continuing operations $117.6 $8.2 $309.8 $155.8
Add: Interest expense, net of
tax, for senior convertible
debentures 1.6 -- 6.0 --
Less: Dividends on preferred
stock -- (9.4) -- (42.9)
Income from continuing
operations available to common
shareholders $119.2 $(1.2) $315.8 $112.9
Weighted average common shares
outstanding 369.6 366.6 368.8 356.7
Dilutive effect of stock awards
and contingently issuable
shares(A) 73.8 3.1 74.2 2.6
Weighted average common and common
equivalent shares outstanding 443.4 369.7 443.0 359.3
Diluted earnings per share from
continuing operations $0.27 $0.00 $0.71 $0.32
(A) Amounts for the three and twelve months ended December 31, 2007
include contingently issuable shares associated with our convertible
debentures and preferred stock.
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
(amounts in millions, except percentages)
(unaudited)
In addition to disclosing financial results in accordance with generally accepted accounting principles (GAAP), the Company also discloses gross profit, gross margin (gross profit as a percentage of revenue), operating income before depreciation and amortization, divestitures and impairments, diluted income per share from continuing operations exclusive of divestitures and asset impairments, debt refinancing costs and income tax adjustments and free cash flow, which are non-GAAP measures.
We believe that our presentation of gross profit and gross margin is useful to investors because they are indicators of the strength and performance of our ongoing business operations, including our 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 and gross margin to evaluate business growth and the efficiency of our operations. Following is a reconciliation of gross profit and gross margin (in millions, except percentages):
Three Months Twelve Months
Ended December 31, Ended December 31,
2007 2006 2007 2006
Revenue $1,520.3 $1,465.5 $6,068.7 $5,908.5
Less: Cost of operations (933.6) (925.8) (3,787.1) (3,786.4)
Gross profit $586.7 $539.7 $2,281.6 $2,122.1
Gross margin 38.6 % 36.8 % 37.6 % 35.9 %
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 Twelve Months
Ended December 31, Ended December 31,
2007 2006 2007 2006
Operating income before
depreciation and
amortization, divestitures and
impairments $435.5 $393.5 $1,649.7 $1,534.8
Less: Loss from divestitures
and asset impairments -- (8.0) (40.5) (22.5)
Operating income before
depreciation and
amortization 435.5 385.5 1,609.2 1,512.3
Less: Depreciation and
amortization (140.9) (135.0) (553.5) (557.7)
Operating income $294.6 $250.5 $1,055.7 $954.6
We believe our presentation of diluted income per share from continuing operations exclusive of divestitures and asset impairments, debt refinancing costs and income tax adjustments provides an understanding of operational activities before the financial impact of certain unusual or otherwise non-operational items, including 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 items 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.
ALLIED WASTE INDUSTRIES, INC.
SUMMARY DATA SHEET
RECONCILIATION OF CERTAIN NON-GAAP MEASURES
(amounts in millions, except per share data)
(unaudited)
Following is a summary of adjustments to diluted income per share from continuing operations (per share amounts):
Three Months Twelve Months
Ended December 31, Ended December 31,
2007 2006 2007 2006
Diluted income per share from
continuing operations $0.27 $0.00 $0.71 $0.32
Add: Loss from divestitures
and asset impairments -- 0.01 0.06 0.04
Add: Debt refinancing costs -- -- 0.08 0.07
Add: Income tax adjustments (0.03) 0.16 (0.05) 0.16
Diluted income per share from
continuing operations
exclusive of loss from
divestitures and asset
impairments, debt
refinancing costs and income
tax adjustments $0.24 $0.17 $0.80 $0.59
Free cash flow is defined as cash flow from operations 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 Twelve Months
Ended December 31, Ended December 31,
2007 2006 2007 2006
Free cash flow $164.2 $144.0 $479.0 $250.1
Add: Capital expenditures 173.9 156.5 670.0 661.1
Less: Premium on debt
repurchases -- -- (57.0) (37.2)
Less: Proceeds from sale of
fixed assets (13.8) (10.7) (25.8) (21.7)
Cash provided by operating
activities from
continuing operations $324.3 $289.8 $1,066.2 $852.3
Following is a reconciliation of the 2008 free cash flow outlook to cash provided by operating activities from continuing operations (in millions):
2008 Outlook
Free cash flow $400
Add: Capital expenditures 650
Cash provided by operating activities from continuing
operations $1,050
Allied Waste 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.
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