- Internal Revenue Growth Increased 4.8% -
- Average Unit Prices Increased 3.0% -
- Full Year 2005 Outlook Reaffirmed -
SCOTTSDALE, Ariz., Oct. 25 /PRNewswire-FirstCall/ -- Allied Waste
Industries, Inc. (NYSE: AW), a leading waste services company, today reported
financial results for the third quarter ended September 30, 2005. Allied
Waste highlighted the following information from its reported financial
results:
* Diluted earnings per share increased to $0.13 compared to $0.12 for the
third quarter 2004;
* Third quarter internal revenue growth increased 4.8% over the prior
year, driven by strong price and volume increases;
* Operating income increased to $229 million compared to $228 million for
the third quarter 2004;
* Operating income before depreciation and amortization* was $371 million
compared to $371 million for the third quarter 2004; and
* $7 million of reductions to operating income related to the Gulf Coast
Hurricanes are included in the third quarter 2005 results.
Revenue for the third quarter ended September 30, 2005 increased by $60
million to $1.477 billion from $1.417 billion in the third quarter 2004. The
increase in revenue resulted from internal growth of 4.8% reflecting growth in
all core lines of business. Core internal revenue growth was comprised of a
$40 million, or 3.0%, increase in same store average unit price, which
includes a 1.8% increase associated with a fuel recovery fee initiated in
2005, and a $24 million, or 1.8%, increase in same store volumes.
Additionally, recycling and other non-core revenue decreased by approximately
$4 million.
Operating income for the third quarter 2005 increased to $229 million from
$228 million for the third quarter 2004 and operating income before
depreciation and amortization* was $371 million, comparable to the $371
million in the third quarter of 2004. Total growth in revenue was offset
primarily by normal inflation on the company's overall cost base and a $23
million increase in fuel costs related to the significant year over year
increase in the cost of diesel fuel. During the quarter the company incurred
approximately $7 million of reductions to operating income related to the Gulf
Coast Hurricanes including $10 million of asset impairment charges related to
lost or damaged equipment and facilities, receivable reserves, employee aid
and other related expenses, partially offset by a $3 million net benefit from
hurricane-related clean-up work.
Diluted earnings per share for the third quarter 2005 increased to $0.13,
compared to $0.12 in the third quarter 2004. The company recorded a $9
million, or $0.03 per share, after-tax gain on discontinued operations during
the third quarter 2005 related to a prior period divestiture.
Cash flow from operations in the third quarter 2005 was $155 million
compared to $254 million in the third quarter 2004. The decrease in cash flow
from operations was driven primarily by the negative effect of the increase in
working capital. During the third quarter 2005, free cash flow* was $1
million, compared to $72 million in the third quarter 2004. The decrease in
free cash flow* was driven primarily by increases in capital expenditures and
the negative effect of the increase in working capital.
"We are pleased with the operating performance for the third quarter, led
by the strongest pricing results we've produced in five years," said John J.
Zillmer, Chairman and CEO of Allied Waste. "We are continuing to successfully
execute the business plan that was laid out at the beginning of the year and
are creating positive momentum to carry into 2006."
For the nine months ended September 30, 2005, operating income was $680
million compared to $693 million for the nine months ended September 30, 2004.
Operating income before depreciation and amortization* was $1.097 billion on
revenues of $4.267 billion for the nine months ended September 30, 2005
compared to operating income before depreciation and amortization* of $1.114
billion on revenues of $4.127 billion for the nine months ended September 30,
2004. Cash flow from operations was $473 million and free cash flow* was
($13) million for the nine months ended September 30, 2005 compared to cash
flow from operations of $438 million and free cash flow* of $129 million for
the nine months ended September 30, 2004.
Allied Waste has filed supplemental data on Form 8-K that is accessible on
the Company's website or through the SEC EDGAR System.
Allied Waste will host a conference call related to the third quarter
results on Tuesday, October 25th at 5:00 p.m. ET. The call will be broadcast
live over the Internet on the Company's website: http://www.alliedwaste.com. A
replay of the call will be available on the site after the call.
Allied Waste Industries, Inc., a leading waste services company, provides
collection, recycling and disposal services to residential, commercial and
industrial customers in the United States. As of September 30, 2005, the
Company operated a network of 315 collection companies, 166 transfer stations,
169 active landfills and 58 recycling facilities in 37 states and Puerto Rico.
*Information Regarding Use of Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with generally
accepted accounting principles (GAAP), the Company also discloses operating
income before depreciation and amortization and free cash flow, which are
non-GAAP measures. We believe that our presentation of operating income
before depreciation and amortization is useful to investors because it is an
indicator of the strength and performance of our ongoing business operations,
including our ability to fund capital expenditures and our ability to incur
and service debt. While depreciation and amortization are considered
operating costs under GAAP, these expenses are non-cash and primarily
represent the allocation of costs associated with long-lived assets acquired
or constructed in prior years. Management uses operating income before
depreciation and amortization to evaluate the operations of its geographic
operating regions. Following is a reconciliation of operating income before
depreciation and amortization to operating income:
($ in millions) For the Three Months Ended September 30,
2005 2004
Operating income before
depreciation and
amortization $371.1 $370.9
Less: Depreciation and
amortization 142.0 142.7
Operating income $229.1 $228.2
($ in millions) For the Nine Months Ended September 30,
2005 2004
Operating income before
depreciation and
amortization $1,096.5 $1,114.0
Less: Depreciation and
amortization 416.3 421.2
Operating income $680.2 $692.8
Free cash flow is defined as operating income before depreciation and
amortization plus other non-cash items, less cash interest, cash dividends,
cash taxes, capping, closure, post-closure and environmental expenditures,
capital expenditures (other than for acquisitions) and changes in working
capital. For the nine months ended September 30, 2005, free cash flow also
excludes an IRS litigation related payment of $22.6 million. Management
believes the presentation of free cash flow is useful to investors because it
allows them to better assess and understand the Company's ability to meet debt
service requirements and the amount of recurring cash generated from
operations after expenditures for fixed assets. Free cash flow does not
represent the Company's residual cash flow available for discretionary
expenditures since we have mandatory debt service requirements and other
required expenditures that are not deducted from free cash flow. Free cash
flow does not capture debt repayment and/or the receipt of proceeds from the
issuance of debt. We use free cash flow as a measure of recurring operating
cash flow. The most directly comparable GAAP measure to free cash flow is
cash provided by operating activities from continuing operations.
Following is a reconciliation of free cash flow to cash provided by
operating activities from continuing operations:
($ in millions) For the Three Months Ended September 30,
2005 2004
Free cash flow $1.3 $71.8
Add: Capital expenditures 207.9 164.4
Capitalized interest 3.6 3.3
Payments of preferred
stock dividends 14.8 5.4
Change in disbursement
account (72.9) 10.6
Premiums on debt
repurchases -- (3.8)
Other 0.4 1.9
Cash provided by operating
activities from continuing
operations $155.1 $253.6
($ in millions) For the Nine Months Ended September 30,
2005 2004
Free cash flow (13.4) $129.4
Add: Capital expenditures 491.4 366.3
Capitalized interest 10.7 9.9
Payments of preferred
stock dividends 34.1 16.2
Change in disbursement
account 21.5 41.1
IRS litigation related
payment (22.6) --
Premiums on debt
repurchases (49.4) (125.8)
Other 0.3 0.9
Cash provided by operating
activities from continuing
operations $472.6 $438.0
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.
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
and Exchange Act of 1934. Words such as "expects," "intends," "plans,"
"projects," "believes," "outlook," "estimates" and similar expressions are
used to identify these forward-looking statements. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions that are difficult to predict. Although we believe that the
expectations reflected in these forward looking statements are reasonable, we
can give no assurance that such expectations will prove to be correct.
Forward looking statements in this press release include, among others,
statements regarding our outlook or ability to meet our full year goals for
2005, or our ability to create positive momentum into 2006.
These forward-looking statements involve risks and uncertainties which
could cause actual results to differ materially including, without limitation:
(1) weakness in the U.S. economy may cause a decline in the demand for the
Company's services (particularly in the commercial and industrial sectors), a
decline in the price of commodities sold by us, increased competitive pressure
on pricing and generally make it more difficult for us to predict economic
trends; (2) we may be impeded in the successful integration of acquired
businesses and our market development efforts, which may cause significant
increases in our waste disposal expenses; (3) we may be unsuccessful in
achieving greater aggregate revenues from price increases; (4) a change in
interest rates or a reduction in the Company's cash flow could impair our
ability to service and reduce our debt obligations; (5) volatility in interest
rates may, among other things, affect earnings due to our variable interest
rate debt and possible mark to market changes on certain interest rate hedges;
(6) divestitures by us may not raise funds exceeding financing needed for
future acquisitions or may not occur at all; (7) severe weather conditions
could impair our operating results; (8) the covenants in our credit facilities
and indentures may limit our ability to operate our business; (9) we could be
unable to obtain required permits; (10) we may be unable to raise additional
capital to meet our operational needs; (11) our ability to service and
refinance our debt and operate our business because of our significant
leverage; (12) increases in final capping, closure, post-closure, remediation
and regulatory compliance costs could result in an increase in our operating
costs; (13) we may be unable to obtain financial assurances, including if our
bonds are downgraded; (14) the loss of services of any members of senior
management may affect our operating abilities; (15) government regulations may
increase the cost of doing business; (16) potential liabilities, including the
outcome of litigation brought by government agencies, liabilities associated
with our acquisitions and hazardous substance and environmental liabilities,
as well as the outcome of other legal or tax proceedings, could increase
costs; (17) potential increases in commodity, insurance and fuel prices may
make it more expensive to operate our business; (18) potential increases in
our operating costs or disruption to our operations as a result of union
initiated work stoppages; (19) risks associated with undisclosed liabilities
of acquired businesses; (20) the 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; (21) we may not be able to realize some or all
anticipated net benefits associated with the best practice programs; (22)
potential volatility resulting from impairment of the Company's goodwill; (23)
changes in internal controls resulting from compliance with the Sarbanes-Oxley
Act of 2002 and any associated costs; and (24) potential issues arising from
changes in accounting estimates and/or judgments.
Other factors which could materially affect such forward-looking
statements can be found in the Company's periodic reports filed with the
Securities and Exchange Commission, including risk factors detailed in
Management's Discussion and Analysis in Allied's Form 10-K for the year ended
December 31, 2004 and Form 10-Q for the quarter ended June 30, 2005.
Shareholders, potential investors and other readers are urged to consider
these factors carefully in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such 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 such
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
September 30, % of September 30, % of
2005 Revenues 2004(A) Revenues
Revenue $1,476.9 100.0% $1,417.2 100.0%
Cost of operations 970.4 65.7% 910.6 64.3%
Selling, general and
administrative expenses 135.4 9.2% 135.7 9.6%
Depreciation and
amortization 142.0 9.6% 142.7 10.0%
Operating income 229.1 15.5% 228.2 16.1%
Interest expense and
other(B) 127.5 8.6% 140.4 9.9%
Income before income
taxes 101.6 6.9% 87.8 6.2%
Income tax expense 52.4 3.6% 46.5 3.3%
Minority interest 0.0 0.0% (4.2) (0.3)%
Income from continuing
operations 49.2 3.3% 45.5 3.2%
Discontinued operations,
net of tax 9.2 0.7% (1.4) (0.1)%
Net income 58.4 4.0% 44.1 3.1%
Dividends on Series C
Preferred Stock (5.4) (0.4)% (5.4) (0.4)%
Dividends on Series D
Preferred Stock (9.4) (0.6)% -- --%
Net income available to
common shareholders $43.6 3.0% $38.7 2.7%
Weighted average common
and common
equivalent shares 332.5 319.2
Diluted income per share
from continuing
operations $0.10 $0.13
Diluted income per share $0.13 $0.12
Operating income before
depreciation
and amortization(C) $371.1 25.1% $370.9 26.2%
(A) Historically we have reported certain taxes imposed on landfill and
transfer volumes as a reduction of revenue because they were viewed as
pass through costs generally collected from customers. In addition, we
reported a small but growing amount of administrative fees billed to
customers as an offset to our administrative costs. Effective April
2005, we began recording all taxes that create direct obligations for
us as operating expenses and recording fees billed to our customers as
revenue. This presentation is in accordance with Emerging Issues Task
Force (EITF) Issue 99-19, Reporting Revenue Gross as a Principal versus
Net as an Agent. The impact on prior period financial statements was
not material. Notwithstanding materiality, we opted to conform the
prior year's presentation of our revenues and expenses with the current
year's presentation by increasing revenue, cost of operations and
selling, general and administrative expenses. These adjustments had no
impact on our consolidated operating income administrative expenses for
the quarter ended September 30, 2004 ncreased by approximately $39.5
million, $36.2 million and $3.3 million, respectively.
(B) Interest expense and other for 2004 includes: (a) $4.8 million (or
$0.01 per share), related to the write-off of deferred financing costs
and premiums paid in conjunction with the early repayment of debt, and
(b) $8.7 million (or $0.02 per share) of net gain, related to non-hedge
accounting interest rate swap contracts.
(C) Operating income before depreciation and amortization, a non-GAAP
measure, is reconciled to operating income in the press release.
Operating income before depreciation and amortization from discontinued
operations is not reported in this amount.
ALLIED WASTE INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in millions, except per share data and percentages)
(unaudited)
For the Nine For the Nine
Months Ended Months Ended
September 30, % of September 30, % of
2005 Revenues 2004(A) Revenues
Revenue $4,266.8 100.0% $4,127.4 100.0%
Cost of operations(B) 2,788.0 65.3% 2,608.7 63.2%
Selling, general and
administrative expenses 382.3 9.0% 404.7 9.8%
Depreciation and
amortization 416.3 9.8% 421.2 10.2%
Operating income 680.2 15.9% 692.8 16.8%
Interest expense and other(C) 457.7 10.7% 611.8 14.8%
Income before income taxes 222.5 5.2% 81.0 2.0%
Income tax expense(D) 96.3 2.2% 42.8 1.0%
Minority interest (0.7) (0.0)% (2.9) (0.0)%
Income from continuing
operations 126.9 3.0% 41.1 1.0%
Discontinued operations,
net of tax 10.2 0.2% (9.2) (0.2)%
Net income 137.1 3.2% 31.9 0.8%
Dividends on Series C
Preferred Stock (16.2) (0.4)% (16.2) (0.4)%
Dividends on Series D
Preferred Stock (21.0) (0.5)% -- --%
Net income available to
common shareholders $99.9 2.3% $15.7 0.4%
Weighted average common and
common
equivalent shares 329.3 319.0
Diluted income per share
from continuing
operations $0.27 $0.08
Diluted income per share $0.30 $0.05
Operating income before
depreciation
and amortization(E) $1,096.5 25.7% $1,114.0 27.0%
(A) Historically we have reported certain taxes imposed on landfill and
transfer volumes as a reduction of revenue because they were viewed as
pass through costs generally collected from customers. In addition, we
reported a small but growing amount of administrative fees billed to
customers as an offset to our administrative costs. Effective April
2005, we began recording all taxes that create direct obligations for
us as operating expenses and recording fees billed to our customers as
revenue. This presentation is in accordance with Emerging Issues Task
Force (EITF) Issue 99-19, Reporting Revenue Gross as a Principal versus
Net as an Agent. The impact on prior period financial statements was
not material. Notwithstanding materiality, we opted to conform the
prior year's presentation of our revenues and expenses with the current
year's presentation by increasing revenue, cost of operations and
selling, general and administrative expenses. These adjustments had no
impact on our consolidated operating income administrative expenses for
the nine months ended September 30, 2004 increased by approximately
$112.6 million, $104.9 million and $7.7 million, respectively.
(B) For 2005, cost of operations includes a $3.7 million (or $0.01 per
share) non-cash charge related to the pre-tax loss on a pending
divestiture.
(C) Interest expense and other includes $62.4 million (or $0.11 per
share) and $151.6 million (or $0.29 per share), for 2005 and 2004,
respectively, related to the write-off of deferred financing costs and
premiums paid in conjunction with the early repayment of debt.
(D) For 2005, income tax benefit includes a $27.0 million (or $0.08 per
share) benefit related to the pending sale of certain operations.
(E) Operating income before depreciation and amortization, a non-GAAP
measure, is reconciled to operating income in the press release.
Operating income before depreciation and amortization from discontinued
operations is not reported in this amount.
SOURCE Allied Waste Industries, Inc.
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Related links:
http://www.alliedwaste.com
CONTACT:
Michael Burnett, Vice President, Investor
Relations of Allied Waste Industries, Inc., +1-480-627-2785
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