Take It From The Top: An Interview With John Rangos

WORLD WASTES STAFF

WW: What are the most important issues facing our industry today?

JR: Pricing has been extremely negative. It was much worse a year ago, but now it's become more regionalized. I see a lot of regional companies working at below cost. We know that because we are in the same geographic area. Competition is heavy, but responsible bidding can be very important.

The public perception of the waste industry has to be turned around by the industry itself. You must create a perception that our industry, which is part of the environmental industry, is doing its job the right way. The public must have confidence in those they're dealing with, and, frankly, our industry has a long way to go to get public confidence.

WW: In what ways do you think the industry has changed since you started your career?

JR: You can almost say it's evolved from the dinosaur age to the space age. The industry used to have sites that were basically open holes next to ravines, where people would put up a scale and an office and take waste. That approach really raped the environment. From the beginning, we thought clay-lined sites were a great asset and they were one of the spearheads of Chambers' fast rise as a public company; people knew they were putting their waste in lined sites. I felt that we were investing in the future. Clay is God's liner, and adding it to a man-made liner makes it almost foolproof.

These sites have gone way beyond the common perception of "dumps." What we've really got are supertankers on land. While supertankers are now adding an extra liner to prevent a rupture, we've been doing that for years. Anyone with long-term plans in this industry is going in that direction. What we have now are very sophisticated facilities that the media should call high-tech environmental waste sites.

WW: Do you see rail haul becoming a more important part of our industry in the future?

JR: I certainly do. Transportation has changed exceedingly. We have a rail system that doesn't emit odor or leak, and people aren't going to complain when it goes through their community. Rodents aren't a problem because each load is sealed. Many of the larger transfer stations have been asking if we would consider rail hauls from their sites to our sites. Rail haul takes traffic off the roads, eliminates truck emissions and creates less noise, all while it's traveling in state-of-the-art containers.

WW: What is your view of the ongoing consolidation in our industry?

JR: Consolidation in the industry was bound to come. Waste Management and BFI have had roughly 1,000 acquisitions since 1990, while mid-sized companies like Chambers, or a little smaller, have been deprived of capital. Now we are at a great disadvantage in our attempts to broaden our growth potential through bidding. Consolidation is going to affect competition because it's been going too much on a one-way street. Certainly, this trend is going to make it very tough in the future for genuine competition to continue.

WW: What is the future for the smaller, independent private contractor?

JR: I believe that a small, well-run family business still has a future in the industry, but I think the barriers to entry are increasing. Just a few years ago, for example, a fellow could get into the business with a truck for $50,000 to $60,000. That's changed very rapidly. Now it's costing around $150,000 to $160,000, not to mention the licensing and everything else.

WW: What are the most profitable areas in this industry today, and what do you think they'll be in five years?

JR: I still believe that landfills will be the most profitable, and transfer stations placed in strategic areas also are going to be profitable. In the future, transportation systems, coupled with strategically-located transfer stations that are enhanced by rail, or by water, are going to be very important.

WW: What is the role of a trade association in the waste management industry?

JR: The trade associations play a very important part in the legislative process, as well as with the general public by helping to increase the confidence in the industry. It was a bad strategy for certain companies to oppose interstate transportation of waste into double-lined sites. Our associations should be in the forefront of disclaiming improper methods, and they also should insist on proper waste handling methods at all times.

WW: What's the remaining capacity of Chambers' landfills?

JR: We have 100 million tons on the books, with 100 million tons that can roll over with the expansions that we're positive we'll get.

WW: What advice would you give to a young person considering a career in solid waste management?

JR: I think the solid waste business is going to have a great future. But kids have to understand that you need to do it the right way from the very beginning. It's painful and expensive, but in the long run that point will help carry you through the tough times. I would like to note here that I'm very proud that our company's management team never once blinked in the midst of a very tough situation. Also, our entire customer base stayed with us when we were having our difficulties.

In addition, the science of making products out of the waste itself has yet to be fully developed. If I were a young guy starting out right now, I'd do the same thing I did earlier on. I got my start by reprocessing the unsightly piles of waste that the steel mills and the coal industry had dumped. I made three products out of coke piles. That's where I made my first fortune and where we got the capital to get started in this business.

I wish I had the time to take one industry's waste and make another product out of it. You can cut their costs, take their waste and make a product out of it. One way this will be done in the future is through partnerships with universities.

There is opportunity out there, but you have to look for it. You have to be damned efficient, and you have to be committed.

Two of the industry's best-known firms have jointly announced a merger that, when completed, will result in the fourth largest solid waste company in North America.

According to the announcement made in late November, Pittsburgh-based Chambers Development Company Inc. will merge with USA Waste Services, headquartered in Dallas. USA Waste has agreed to issue approximately 27.8 million shares of common stock, or .41667 shares for each share of Chambers' Class A common stock and common stock outstanding.

The value of the transaction is approximately $725 million.

The merger will create a company with annual revenues of $450 million and operations in 21 states. USA Waste will own 25 municipal solid waste landfills, 37 collection operations and 13 transfer stations.

The landfills reportedly have a permitted capacity of at least 340 million cubic yards.

USA Waste's John E. Drury will lead the company as chairman and chief executive officer. John G. Rangos Sr., the chairman and CEO of Chambers, will serve as a vice-chairman of the Board of Directors, along with Donald F. Moorehead from USA Waste. Moorehead also will be the new company's chief development officer.

"Our strong waste collection operations coupled with Chambers' exceptional landfill properties will provide significant operating leverage to the combined asset base," said Drury.

"The combination creates a strong, vibrant entity, capable of participating in the continuing consolidation in the solid waste industry," said Rangos.

The approval of both companies' shareholders, as well as settlement of certain litigation affecting Chambers, are necessary to complete the merger. Earlier in November, Chambers announced that it had recorded a third quarter $74 million charge to settle a long-standing class-action litigation.

Once these conditions are satisfied, the merger will take an additional six months to consummate.