Allied, Waste Management Announce Plans During Recession

Danielle Jackson

New York -- Since the National Bureau of Economic Research pronounced on Monday that the United States was officially in a recession, the country's two major waste haulers, Houston-based Waste Management Inc. and Scottsdale, Ariz.-based Allied Waste Industries Inc., have announced plans to pay down debt and generate free cash flow to be in good positions when the business climate improves.

Allied's chairman and CEO Tom van Weelden told Reuters that the company will work to generate about $400 million in free cash flow in 2001 and reduce its debt, which stands at approximately $9.3 billion. Allied's third quarter 2001 earnings fell 52 percent on lower-than-expected volumes, and preliminary expectations for 2002 earnings before interest, taxes, depreciation and amortization (EBITDA) are $1.85 billion to $1.95 billion, with expectations of between $350 million and $450 million in free cash flow.

Meanwhile, Waste Management says that it already has reduced its debt by $4 billion since 1999, which currently stands at approximately $7.9 billion. According to chief financial officer (CFO) William Trubeck, the company was on track to reach its $900 million to $1 billion free cash flow target for 2001, despite several recent class-action lawsuits, one of which cost the company $389 million.

Analysts say that both companies will be well-positioned to benefit when the recession ends because they are focusing on reducing debt rather than acquisitions. And, according to Allied's van Weelden, "Garbage never goes away, that's the beauty of the business."