Scottsdale-based Allied Waste Industries, the nation's second-largest waste hauler, is scaling back its income expectation for 2004 because of higher costs to improve its internal operations and a lagging economic growth.
The company announced its second-quarter earnings Tuesday, reporting a $20 million increase in revenue compared with the same quarter of last year, and a $15.2 million loss.
It did not reduce its multibillion-dollar debt during the quarter.
“What I can say is we see growth, but not strong growth,” said Tom Van Weelden, Allied Waste's chairman and CEO. “The state of the industry growth and the implementation of our (internal improvement) programs have a direct impact on our expectations for 2004.”
The company is reducing by 3 percent to 4 percent analysts' original 2004
expectation of $1.6 billion in operating income before depreciation and amortization, or a reduction in value of assets.
“We think revenue growth will be closer to 2 percent than the original 3 percent,” said Pete Hathaway, executive vice president and chief financial officer.
“Because of this, we are reducing our outlook for operating income before depreciation and amortization,” he said.
The company should still produce $275 million to $300 million in free cash flow — or cash flow minus interest, taxes and maintenance capital spending — this year for debt reduction, with a $50 million to $60 million reduction in expenditures for growth capital, ongoing capital and closure and post-closure costs, Van Weelden said.
The company released its second-quarter report just before the market closed. Its stock, traded on the New York Stock Exchange, closed at $12.24 a share Tuesday, down 1.37 percent, on volume of 758,300 shares. The 52-week high was $14.44, while the 52-week low was $10.
Second-quarter revenue totaled $1.36 billion, up from $1.27 billion in the first from quarter and $1.34 during the same quarter of 2003.
The quarterly loss compared to $3 million in net income for the first quarter and $30.9 million in net income for the same quarter of 2003.
The company's debt remained at $7.9 billion during the second quarter, while its debt-to-capital ratio was 75.7 percent. Its debt was reduced by $325 million during the first quarter.
An increase in pricing was offset by a decrease in volume during the second quarter, Van Weelden said. Inflationary cost increases offset internal revenue growth during the quarter, while costs incurred for vehicle maintenance increased about $7 million and costs related to its internal improvement programs increased about $9 million.
“We are slowly seeing improving business conditions,” he said. “Pricing is on an upward track, but on a modest slope. The collection business appears to be stable, but without the level of growth that we had hoped for 2004.”
Allied Waste serves residential, commercial and industrial customers through 312 collection companies, 164 transfer stations, 167 landfills and 57 recycling facilities in 37 states.