Executive Summary
NSJ Consulting is pleased to present its financial evaluation and recommendations to Allied Waste Industries' Senior Management. This analysis examines the Company's performance over a five year period (YE2002 through YE2006) and draws comparisons to industry peers. Recommendations and suggestions for improvement are integrated throughout and serve collectively as a cornerstone for Allied Waste's continual success in the non-hazardous solid waste management business.
The primary issues facing the Company today, and into the future, stem from its (1) expense management and (2) an over-levered capital structure. These issues are working in conjunction to produce marginal returns on net income, assets and equity, which are all below industry averages. These specific issues were selected because they are prevalent across the total analysis horizon and materially impact the underlying value of the Company.
NSJ Consulting has concluded that in order to mitigate these issues and to improving the underlying value of the Company, the following recommendations should be implemented:
Expense Management Recommendations:
? The Company should reinforce its commitment to Best Practice initiatives;
? Improve transportation productivity through better routing and maintenance efficiency;
? Reduce procurement costs through more effective pricing;
? Increase overall operating productivity by timely divestment of operations that do not provide adequate returns;
? To offset the exposure to rising energy costs, all new contracts, renewals or re-negotiations must provide for a fuel or energy surcharge, and;
? To hedge fuel market volatility, the Company must continue to execute fixed price fuel purchase contracts.
Leverage Re ...