According to the US-based Waste Business Journal (www.wastebusinessjournal.com) Allied Waste Industries, Inc. (NYSE: AW), the U.S second largest waste services company, has reported financial results for its third quarter and nine-months ended September 30, 2008. For the quarter, income from continuing operations increased 68 per cent to $112.5 million, or $0.26 per share, including $0.02 per share associated with merger-related costs. Prior year income from continuing operations was $66.9 million, or $0.15 per share. Prior year earnings include loss on divestiture, impairment and debt refinancing costs of $0.09 per share. On an adjusted basis, 2008 third quarter earnings were $0.28* per share, an increase of 17 per cent over prior earnings of $0.24* per share.
Total revenue for the third quarter was a record $1.61 billion, an increase of $50 million, or 3.2 per cent, over $1.56 billion in the third quarter 2007. Higher revenue for the quarter benefited from a 7.6 per cent increase in average price, of which 370 basis points were associated with the company’s fuel recovery fee, partially offset by a 4.4 per cent decrease in volumes. Lower volumes for the quarter primarily reflect the impact of U.S. economic conditions.
“By remaining focused on our strategic, long-term performance metrics including pricing, operating efficiencies and cash flow, while rapidly adjusting our operations to near-term economic challenges, Allied Waste has reported strong financial performance,” said John Zillmer, Chairman and Chief Executive Officer. “Our local management teams have done a great job in delivering excellent third quarter results and in continuing to strengthen our overall operating platform as we approach the merger with Republic Services.”
Third quarter operating income before depreciation and amortization, loss from divestitures and asset impairments, or EBITDA, inclusive of $12.5 million of merger-related costs, increased 4.4 per cent to $452.1* million, compared with $433.1* million last year. Reported EBITDA for the quarter as a percentage of revenue increased 20 basis points to 28.1 per cent, compared with 27.9 per cent for the same period last year. Merger-related costs reduced EBITDA as a percentage of revenue for the quarter by 0.8 per cent.
For the third quarter, operating costs as a percentage of revenue dropped 60 basis points as the company continued to benefit from strong pricing, combined with a number of internal initiatives to lower expenses and to drive greater efficiencies throughout its operations. EBITDA margins for the quarter also reflect the positive impact of company actions to reduce SG&A expenses, which declined as a percentage of revenue to 9.7 per cent from 10.1 per cent last year.
Cash flow from operations in the third quarter 2008 was $281.3 million, compared with $284.2 million in the comparable quarter last year. Free cash flow for the third quarter was $144.7* million, compared with prior year free cash flow of $168.8* million reflecting slightly higher capital expenditures in the third quarter of 2008.
For the nine-month period ended September 30, 2008, Allied Waste’s revenues were $4.67 billion, as strong pricing drove a $124.3 million increase over the prior year. Operating income for the period gained 13.3 per cent to $862.1 million, inclusive of $45.0 million of merger-related costs, losses from divestitures and asset impairments. Income from continuing operations was $296.5 million for the first nine months of 2008, compared with $192.2 million for the comparable 2007 period. Diluted income from continuing operations for the first-nine months increased 55 per cent to $0.68 per share, compared with $0.44 per share in the prior year.
The merger of Allied Waste and Republic Services continues on track with an anticipated completion in mid-December 2008. In the joint proxy statement / prospectus of the companies dated October 10, 2008, shareholders of record as of October 6, 2008 are being asked to vote in favor of the merger at each company’s respective shareholder meeting which will be held on November 14, 2008.
The merger, which is expected to generate at least $150 million in annual integration synergies in the third year after closing, will strengthen the national service platform of the companies and link collection, transfer, recycling and disposal operations into an efficient network spanning 40 states and serving 13 million customers. The resulting company will be one of the nation’s leading waste and environmental services providers, with pro forma 2007 revenue of approximately $9 billion and industry-leading margins and returns on invested capital.
“The significant growth and synergy opportunities supporting this transaction are even more compelling given the challenging economic conditions facing the country and our industry,” said Donald Slager, President and Chief Operating Officer. “The Allied Waste and Republic teams have done a great job working through the requirements needed to achieve our targeted fourth quarter closing and in completing extensive planning work in support of the successful post-merger integration of these two companies.”
Allied Waste 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, 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 38 states and Puerto Rico. Our team of over 22,000 dedicated employees operates within a highly efficient, integrated organization that generated 2007 revenue of $6.1 billion.
Websites: alliedwaste.com and disposal.com