THE SIXTH ANNUAL WasteAge 100

WORLD WASTE STAFF

Twelve months ago qualifies as ancient history in the solid waste industry, so when we began assembling our Sixth Annual Waste Age 100, we knew we had our work cut out for us. We relied on several sources for this report, including Dun & Bradstreet, Chicago, and in the end, our own verification of the information.

The results of our 1999 survey of the top 100 private refuse firms - based on 1998 revenues - verifies the jockeying of the industry's acquiring companies over the past year. As for the types of companies being purchased, few seemed immune from the disappearing act as our list testifies. Well-established companies such as Rabanco, Bellevue, Wash., and newer operators like American Disposal, Burr Ridge, Ill., have been absorbed into larger companies. Others on the 1999 list, Browning-Ferris Industries (BFI), Houston, for example, will disappear from next year's accounting because it was absorbed by Allied Waste Industries, Scottsdale, Ariz.

Those who remained to fight for a 1999 ranking include Waste Management, Houston, which keeps its industry leader title, followed by the final appearance of BFI. Allied leapt forward (even without BFI) from No. 5 to No. 3, while Republic Services, Ft. Lauderdale, Fla., held on to its No. 4 position. The billionaire club abruptly ends there; the ranks of $100 million-plus operations end after the first thirteen.

The effects of consolidation radiate in the revenue column, especially when you compare it with our previous years' stories. In our 1994 Waste Age 100 report of 1993 figures, the top 100 companies reported a $19,467 billion total revenue. Last year, the top five companies' combined 1997 revenues reached $19,580 billion. Now, the top four report $20,393 billion in 1998 revenues, and the gap already has closed on next year's list (minus BFI, 1999's top four will be 2000's top three).

Consider, too, that it took $11 million in revenue to qualify for the 1994 Waste Age 100 list, $7 million last year, and $4 million to attain the status this year.

What else does the 1999 Waste Age 100 list foretell? This year's listing gives you a broad look at the companies, including the CEO, year founded, information source, last year's ranking, whether it is publicly or privately held, 1998 revenues, projected 1999 revenues, number of employees, business areas including commercial/industrial or residential collection, and operational areas including collection, recycling, landfills and transfer stations.

However, in a marketplace like ours, this information best serves as a framework to view the future.

Consider how the independents are reacting to the barrage of buyouts. Some believe that small haulers "thrive on the disbalance" created by acquisitions and use the opportunity to steal customers. "This provides a tremendous opportunity for the small guy," says Bruce Parker, president of the Washington, D.C.-based Environmental Industry Associations.

Merger specialist Steve Goode of Marketing Resource Group, Raleigh, N.C., agrees. "Independent private haulers will continue growing their companies at a steady rate, taking advantage of any newly created niche market resulting from a merger."

Industry insiders don't expect the acquisition rate to slow in the coming year, but they predict an increased emphasis on tuck-ins and asset swaps to increase a company's density. "The rate shouldn't slow because too many deals still are in the pipeline," Parker says, noting that companies will be buying more strategically to increase their internalization rate.

Goode agrees, saying, "Acquisitions feed the necessary growth numbers required by most companies and often times come in spurts." However, he believes "the revenue acquired per acquisition could go down slightly."

Other factors are expected to affect the buying game, too - including whether a company is using cash (instead of stock) to expand through acquistions as Republic does.

Then, there's the question of when buyers will focus more on internal rather than external growth. "Buyers always have concentrated on increasing the bottom line through efficiencies as well as through acquisitions," Goode says.

Acquisitions help provide larger companies with a pool of experienced, talented managers, says Gary Goldberg, president of Specialty Transportation Service, Portage, Ind. "Companies are trying to put together the 'cream of the crop,' with the goal of increasing the bottom line through the best possible management," he says.

On the flip side, some industry observers believe larger companies' acquisition activity ultimately will be restrained by pressures to meet their earnings projections - some already are highly leveraged. These companies must grow internally and "create growth through managing," Parker says. At some point, you reach a size where "you just can't buy much more."

Certainly, healthy companies remain, including haulers that are flush with money from a buyout, ready to start new businesses. While no statistics exist on this subject, "from my involvement in acquistions and mergers, I know people who either got back into the business at the end of their non-compete or moved to an area outside the non-compete to start again," Goode says.

Apparently, many cannot shake the appeal of this industry. "They get bored and have cash," Parker says, "and lots are coming back in."

What makes this industry attractive? "Look at the simplicity of this industry," Parker suggests. "Technology won't replace what we do." The basic business model has not changed - only its scale, he says. "Now we've reached a size where competitors are swapping assets."

Amid public pressures, environmental challenges and legal hassles, money still is what makes this industry whirl. But private contractors have switched their focus to the short-term.

It's been said that garbagemen used to manage money. Now, it appears that money is managing garbagemen. WA

Waste Age's Editorial Director Bill Wolpin provided analysis for this report. Managing Editor Patricia-Anne Tom and Editorial Assistant Julie Arndt compiled the listing of companies.