Allwaste, Inc.

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Allwaste, Inc.

5151 San Felipe
Houston, Texas 77056
U.S.A.
(713) 623-8777
Fax: (713) 625-7085
Web site: http://www.allwaste.com

Public Company
Incorporated: 1978 as Allwaste of Texas, Inc.
Employees: 4,057
Sales: $382.2 million (1996)
Stock Exchanges: New York
SICs: 4212 Local Trucking without Storage; 4953 Refuse Systems; 7699 Repair Shops & Related Services, Not Elsewhere Classified

Allwaste, Inc. provides industrial and commercial customers with a range of environmental and industrial services in North America and Austria. These included, in the mid-1990s, on-site industrial cleaning and waste management; waste transportation and processing; wastewater pretreatment, site remediation; container cleaning, maintenance and repairs; and emergency spill response services. Allwaste has grown chiefly through acquisition, having purchased about 90 businesses in its first decade as a public company.

Private Company, 1977–86

Allwaste was founded in 1977 by Raymond L. “Bubba” Nelson, Jr. After earning a degree in industrial management from McNeese State University, he had gone to work driving a garbage truck for the family business, Nelson Industrial Services of Sulphur, Louisiana. This enterprise had expanded to 16 trucks by 1971, when it was sold to Browning-Ferris Industries Inc. (BFI) for $2 million in stock. As part of the agreement, Nelson stayed on to run the company, but he later moved to Houston to help Browning-Ferris acquire similar family-owned garbage operations.

While in Houston, Nelson saw an opportunity in industrial waste removal and started Allwaste in 1977 with a single air mover, a powerful industrial vacuum cleaner, mounted on a truck chassis, that he operated himself. Purchased for $85,000 with his BFI stock as collateral, this device was used to remove waste from petrochemical-refinery smokestacks and tanks and steel-mill blast furnaces. “Before, they used buckets and shovels, but air moving cut the time needed to do the job by 80 percent,” Nelson later told a reporter. Nelson soon added electrical utilities to his roster of clients.

Allwaste had a fleet of 14 air movers serving Texas petrochemical plants before the collapse of oil prices in the early 1980s almost swamped the fledgling firm under a torrent of debt. By firing one-quarter of his employees, calling on customers himself, and cutting other expenses, Nelson kept the company afloat until the local economy recovered. Interviewed by Forbes in 1990, he recalled, “The experience taught me that big is not necessarily beautiful in this business. Now we try to have all our locations three or four trucks underequipped. If one location has an onslaught of business, he can call his buddy next door.”

Headlong Growth, 1986–88

By 1986 Allwaste was operating from five locations in three states. Nelson took the company public in December 1986 in a stock offering that raised about $7 million for Allwaste. Revenues grew from $9.2 million in fiscal 1985 (the year ended August 31, 1985) to $13.1 million in fiscal 1986, while net income increased from $143,000 to $581,000.

During the next two years Allwaste acquired about 25 small, family-run waste companies, keeping the owners on as managers, a strategy he later described as “not any different than what Browning-Ferris Industries and Waste Management did in the Seventies.” It entered the trailer-tank cleaning field in October 1987 by acquiring Independent Tank Cleaning Services, Inc. of Atlanta. Also in that year the firm entered the growing asbestos abatement business. Allwaste had become the nation’s leader in the vacuuming of industrial waste by the end of 1988. It was providing services from 20 facilities located in the southern and western United States and Canada, primarily for the refining, petrochemical, utility, steel, pulp and paper mining and manufacturing industries.

Allwaste’s revenues soared from $27.1 million in fiscal 1987 to a startling $86 million in fiscal 1988, when net income reached $6.5 million. The company netted another $10.9 million from a February 1988 secondary public stock offering and ended the fiscal year with a 45 percent average annual return on invested capital over the last three years and a 77 percent average return on equity for the preceding five years. It was ranked second that year by Forbes among the 200 best small companies in the United States. Its stock, trading at about 30 times earnings, had risen fivefold since the company had gone public less than three years earlier.

Expansion by Acquisition, 1989–90

Allwaste acquired 14 companies in 1989 and earned $13.5 million during the fiscal year on revenues of $131.5 million. It became the largest glass recycler in North America by acquiring Cleveland-based The Bassichis Co. in April 1989 and began providing dewatering and sludge-processing services by acquiring a Paducah, Kentucky, company. To fund its acquisitions, the company raised $30 million in a public offering of convertible bonds. In December of that year its common stock split two for one.

By March 1990 Allwaste had acquired 37 companies since its initial public offering, mostly for stock rather than cash. Air-moving services and asbestos removal each was accounting for about one third of the company’s sales. The rest came chiefly from cleaning truck tanks, recycling glass, and manufacturing the Guzzler, a superstrong vacuum machine in great demand. Early that year the company entered the railway-car cleaning business by purchasing Richmond Tank Car Co. of Angleton, Texas. For fiscal 1990 Allwaste reported record net income of $15.4 million on record revenues of $152.7 million. In September 1990 the company sold its Guzzler Manufacturing Inc. unit to a British firm for about $48 million.

Company president Clayton K. Trier, a former accountant, was largely credited by Forbes for Allwaste’s outstanding record of growth by acquisition. The company’s methods were challenged, however, in Barron’s by a professor of accounting who concluded the company was “paying at least as much attention to collecting other waste-collection companies as to actually collecting or cleaning up waste” and “indulging in hazardous accounting practices that tend to inflate corporate profits.” According to the author, Abraham J. Briloff, under legitimate but misleading accounting rules Allwaste had recorded only a tiny fraction of its costs for acquisitions in fiscal 1989 on its balance sheet. Trier resigned shortly after this article was published and was succeeded by Nelson, who was also chairman.

Trimming the Sails, 1991–93

During 1991 Allwaste acquired seven more companies, but it was a poor-performing year for the nation’s economy, and in the fiscal year the company earned only $3.2 million on $166.6 million in revenues. One reason was the growing awareness by industries that asbestos removal might be more hazardous than simply leaving the material in place. In December 1990 Allwaste announced it planned to drop the asbestos-removal division, reporting a loss of about $2.4 million in discontinued operations and a one-time charge of nearly twice that amount. In May 1991, Allwaste sold its asbestos plants in Charlotte and Tampa for $2.9 million and in August sold its remaining asbestos abatement operations to IAM/Environmental for $4.4 million. Allwaste’s revenues increased to $234 million and its net income to $11.5 million in fiscal 1992, during which it acquired eight companies.

Allwaste added the cleaning of 350-gallon stainless-steel intermediate-bulk containers to its services by acquiring a Cleveland company in June 1990. It also began leasing these containers, but in December 1992 sold, for $8.1 million, its 3,000 IBC containers to a unit of Hoover Group Inc. and immediately signed a marketing pact by which Hoover, a manufacturer of the containers, would lease and sell them, while Allwaste would become the recommended container cleaner for Hoover clients.

Allwaste earned net income of $10.2 million in fiscal 1993 on revenues of $243.6 million. Nelson attributed the company’s decentralized chain of command as a primary reason for its success despite a recession for petroleum refineries and other smokestack industries served by environmental cleanup companies. There were only three layers of management between Nelson and the 63 local managers of the nationwide industrial operation comprising Allwaste’s environmental services division, which was accounting for 70 percent of the company’s revenues.

Further Restructuring, 1994–96

During fiscal 1994 Allwaste earned $13.1 million in net income on revenues of $286.9 million. The 1994 revenue figure was restated to reflect the September 1995 sale of glass operations, which had brought in about $63 million the previous year. Allwaste sold this business, Strategic Materials, Inc. to Equus II Inc. for about $57.1 million, so that, in the company’s words, “our focus could be targeted on America’s huge, heavy-industrial customer bases.” Allwaste continued to own warrants in Equus’s stock.

Company Perspectives:

Allwaste is a Houston-based diversified industrial and environmental services company, with operations throughout the United States, Canada, Mexico and Austria. Our mission is to help customers attain a competitive advantage in a global market, and our goal is to be the premier industrial services company in North America by the year 2000.

Using the funds from its glass-recycling sale, Allwaste bought 13 companies in fiscal 1995, including a California company cleaning and repairing heat exchangers, a Canadian pumping service, and a company performing in-plant services for Amoco refineries. It also installed a new management team, including Robert Chiste, who succeeded Nelson as president and chief executive officer. Chiste announced that the firm would be moving into the high-tech and health-care industries.

Allwaste lost $1.1 million in fiscal 1995 on record revenues of $344.2 million. The disappointing result rested, in great part, on pretax charges totaling $11.9 million that related to a waste-water treatment plant, investments in the former asbestos abatement business, the firm’s Mexican operations, and operating plants and equipment. In fiscal 1996 the company had net income of $10.4 million, including an extraordinary gain of $3.8 million from the sale of glass-recycling operations, on revenue of $382.2 million. All waste’s long-term debt was $137.8 million in February 1996.

The first of several small Allwaste start-up firms, Allies Staffing, was formed in September 1995 to provide contract labor during peak demand periods, both for the parent company and third-party firms. This was supplemented the following month by SafeSeal, specializing in online leak-sealing services for refineries and petrochemical plants. AllQuest Energy Services, performing lighting retrofits and improving the efficiency of heating, ventilation, and air conditioning, was started in January 1996. AllQuest Water Resources, upgraded and operating wastewater treatment facilities, was organized the following month. AllQuest Technologies was formed in April 1996 for chemical cleaning and AllQuest Pipeline Services in May to upgrade natural-gas-pipeline compressor systems. Allwaste announced that month that these companies were being placed under a subsidiary known as AllQuest Enterprises.

In August 1996 Allwaste announced that its board had adopted a poison-pill plan intended to make hostile takeover bids for the company prohibitively expensive. According to its provisions shareholders would receive 10-year rights allowing them to buy Allwaste shares at a discount if a person or group acquired 15 percent or more of the company’s stock or began a tender or exchange offer to acquire 20 percent or more of the company’s stock. Allwaste said the plan had not been adopted in response to any specific effort to acquire the company.

Allwaste’s Operations in the Mid-1990s

On-site industrial and waste management accounted for 55 percent of Allwaste’s revenues in fiscal 1995; container services for 14 percent; transportation, roll off, and tank rental for 12 percent, and excavation and site remediation for 11 percent. Industrial cleaning and waste management services were being performed from 98 locations in North America and under long-term contracts at customer facilities at 11 locations. These included air-moving and liquid vacuuming; hydroblasting and gritblasting; dredging, dewatering, and sludge processing; sludge pumping; chemical cleaning; and jet rodding. The customers were primarily in the petrochemical and refining, electric power, pulp and paper, and automotive industries.

Container services were being conducted from 31 locations in the United States. They included the cleaning of over-the-highway tank-trailers, intermodal containers, and railcar tanks, and the cleaning, repair, and maintenance of intermediate bulk containers. Wastewater pretreatment services also were being provided. Allwaste also was providing transportation of wastes from customer sites to designated landfills, recycling and reclamation facilities, and treatment, storage, and disposal facilities. It owned containers used to collect and transport materials and operated liquid-tank transports equipped with vacuum pumps. It operated four facilities accepting nonhazardous commercial and industrial waste products, primarily from third parties, and provided excavation and site remediation, including site preparation, construction, and maintenance of industrial settlement ponds and lagoons.

Principal Subsidiaries

Ace/Allwaste Environmental Services of Indiana, Inc.; Allies Staffing, Inc.; All Safety and Supply, Inc.; Allwaste Access Services, Inc.; Allwaste Asbestos Abatement, Inc.; Allwaste Asbestos Abatement Holdings, Inc.; Allwaste Asbestos Abatement of New England, Inc.; Allwaste Environmental Services, Inc.; Allwaste Environmental Services/Central Florida, Inc.; Allwaste Environmental Services/Chesapeake, Inc.; Allwaste Environmental Services/North Atlantic, Inc.; Allwaste Environmental Services/North Central, Inc. (Illinois); Allwaste Environmental Services/North Central, Inc. (Iowa); Allwaste Environmental Services/South Central, Inc.; Allwaste Environmental Services/West Coast, Inc.; Allwaste Environmental Services of Atlanta, Inc.; Allwaste Environmental Services of Denver, Inc.; Allwaste Environmental Services of Louisiana, Inc.; Allwaste Environmental Services of Missouri, Inc.; Allwaste Environmental Services of Ohio, Inc.; Allwaste Environmental Services of Oklahoma, Inc.; Allwaste Environmental Services of Sarnia, Ltd. (Canada); Allwaste Environmental Services of Texas, Inc.; Allwaste Explosive Services, Inc.; Allwaste Intermountain Plant Services, Inc.; Allwaste/NAL, Inc.; Allwaste of Canada, Ltd. (Canada); Allwaste of Hawaii, Ltd.; Allwaste Oilfield Services, Inc.; Allwaste Railcar Cleaning, Inc.; Allwaste Recovery Systems, Inc.; Allwaste Services of Birmingham, Inc.; Allwaste Services of Charlotte, Inc.; Allwaste Services of El Paso, Inc.; Allwaste Services of Memphis, Inc.; Allwaste Services of Mobile, Inc.; Allwaste Services of Savannah, Inc.; Allwaste Services of Virginia, Inc.; Allwaste Servicios Industriales de Control Ecologico S.A. de C.V. (Mexico); Allwaste Tank Cleaning, Inc.; Allwaste Tank Services S.A. de C.V. (Mexico); Allwaste Transportation and Remediation, Inc.; Allwaste/Whiting, Inc.; ALRC, Inc.; ALW Enterprises, Inc.; APLC, Inc.; BEC/Allwaste, Inc.; Brown Williams Construction, Inc.; Bryson Environmental Services, Inc.; Calipo de Mexico, S.A. de C.V. (Mexico); Calipo, Ltd.; Calipo Reclamation, Ltd. (Canada); Calipo Reingungsges m.b.H. (Austria); Canadian Cargo Clean, Ltd. (Canada); Clean America, Inc.; CPC Heat Exchanger Services, Inc.; Enviro-Jet Services, Inc. (Canada); Honey-Bee Sanitation, Inc. (Canada); Hydrowash Recycling Systems, Inc.; Industrial Construction Services Co., Inc.; Industrial Pond Services, Inc.; J. D. Meagher/Allwaste, Inc.; James & Luther Services, Inc.; Jesco Industrial Services, Inc.; Madsen-Barr-Allwaste, Inc.; Oil Recycling, Inc.; Oneida Asbestos Abatement, Inc.; Oneida Asbestos Removal, Inc.; Roussel Rental Equipment, Inc.; Southern Scaffold, Inc.; Thompson Environmental Management, Inc.; Western Hydro Vac, Inc.