Waste Holdings, Inc.

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Waste Holdings, Inc.

3301 Benson Drive, Suite 601
Raleigh, North Carolina 27609
U.S.A.
Telephone: (919)325-3000
Toll Free: (800)647-9946
Fax: (919)325-3013
Web site: http://www.waste-ind.com

Public Company
Incorporated: 1970 as Waste Industries, Inc.
Employees: 2,100
Sales: $242.43 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: WWIN
NAIC: 562111 Solid Waste Collection; 562212 Solid Waste Landfill; 562219 Other Nonhazardous Waste Treatment and Disposal

Waste Holdings, Inc., called Waste Industries, Inc. until April 2001, is one of the top ten waste companies in the United States. It boasts 42 collection operations, 24 transfer stations, 100 county convenience centers, nine landfills, and eight recycling facilities serving 360,000 municipal, residential, commercial, and industrial locations in the Carolinas, Virginia, Tennessee, Mississippi, Alabama, Georgia, and Florida. Unglamorous though it may be, trash equals cash in the heavily regulated world of solid waste management. Not many companies can count back more 100 consecutive quarters without a loss. The company is 60 percent owned by the Poole family.

Origins

Before starting Waste Industries, Inc. in 1970, Lonnie C. Poole, Jr., earned a civil engineering degree from North Carolina State University and an M.B.A. from UNC-Chapel Hill. After serving as an aviator in the Army, he worked as an engineer at two corporations. At one of these, the construction equipment producer Koehring in Springfield, Ohio, he conducted market research on a new mobile landfill compactor. Although the product did not test successfully, the experience introduced Poole to the world of trash at an opportune time: the federal government was beginning to mandate more sanitary disposal of garbage.

Thus Poole discovered his niche. He returned to his hometown of Raleigh in 1970 to start his business and to avoid moving his new family to yet another new town. At the age of 33, Poole founded Waste Industries, Inc. later in the year with $10,000 in start-up capital, derived from the sale of his home in Ohio, while the family moved in with his parents. Poole convinced his father to let him run the family store as well.

Poole then applied for another job at a local Caterpillar dealer, writes Waste Age, whose owner, Gregory Poole (no relation), provided additional start-up money. This allowed Waste Industries to begin serving several locations at once.

Jim W. Perry, who earned an engineering degree from North Carolina State before becoming a missile launch officer for the Air Force, joined the company in 1971 as its first employee. The company had a tough year convincing communities to operate landfills on a fee basis; private operators were rare. Increasingly stringent government regulations, however, would make the idea seem more plausible in coming years.

In 1972, Waste Industries started collecting corrugated cardboard for recycling. Eventually the managers learned how to price collection services to reduce risk in the volatile recycled commodity markets. This area would provide only a tiny fraction of revenues.

Waste Industries formed a waste equipment sales company, KABCO, in 1973, both to raise cash and to ensure access to good equipment prices. By then, Waste Industries was active in the counties of Wake, New Hanover, and Vance. Smaller towns and counties proliferated throughout the Southeastern countryside. Waste Industries offered these smaller communities a convenient solution to the heavily regulated problem of waste management. The company ran transfer stations for those counties that chose to export their waste.

The industry began to consolidate somewhat in the 1970s. At the same time, the public sector began to transfer more responsibility for day-to-day waste management operations to private companies like Waste Industries, though the South lagged behind the rest of the nation in this trend.

Writes Waste Age, profits were low due to low acceptance from the public, who was not accustomed to paying fees to dump trash. Waste Industries exited the landfill business by 1979, instead concentrating on its trash pickup business. It had much better luck obtaining this type of contract from municipalities.

Branching Out in the 1980s and 1990s

As Waste Industries established branch operations in the mid-1980s, the company adopted a decentralized structure, because of the predominance of local issues affecting the business. It also installed a sophisticated computerized data collection system. After 16 years with the company, Jim Perry was named president and chief operating officer in 1987.

Waste Industries went on an acquisition binge in 1990. In the next seven years, it acquired 19 solid waste collection operations in a bid to become the Southeastern market leader.

A Houston-based firm with a similar name, TransAmerican Waste Industries Inc., offered to buy Waste Industries, Inc. for $209 million in stock in July 1996. Poole rejected the offer when TransAmerican modified it to a combination of $150 million in cash and stock, plus the possibility of a $50 million bonus if earnings targets were met. TransAmerican focused more on waste processing and disposal, compared with Waste Industries’s strength in waste collection.

By 1997, Waste Industries had 20 branch collection operations, 11 transfer stations, and four recycling facilities serving 150,000 municipal, residential, commercial, and industrial locations, reported World Wastes. It operated 100 “county convenience sites” in rural areas of North Carolina. The company competed against as many as 9,000 smaller garbage collecting operations.

Public in 1997

The company launched its initial public offering (IPO) on May 14, 1997. The Poole family owned about 54 percent of shares after the offering, worth $135 million in 1998. Earnings for 1997 were $6 million on revenues of $116 million. After thereby raising funds for expansion, it examined more than 50 collection companies and landfills for purchase. Waste Industries owned few landfills of its own at the time. It relied on 60 public and five private dumps. Landfills and transfer stations were the focus of its expansion strategy in the late 1990s.

Annual revenues were about $160 million after the IPO. The company would increase employment by half, adding 600 new workers, and would acquire 34 companies in the next three years.

Waste Industries had a 25 percent market share in the Carolinas as it expanded in Georgia, Tennessee, Virginia, and Alabama. The Southeastern economy and population were growing a third faster than that of the rest of the country, said Poole. Commercial and industrial customers accounted for more than two-thirds of volume, noted Barron’s. Waste Industries issued more shares to finance other purchases. It continued to expand in North Carolina and Georgia in 1999. In addition, the company acquired a landfill in Decatur County, Tennessee, a partnership with Liberty Waste Services.

In 1999, the company’s CEO forsook his usual $400,000 a year compensation package, pocketing only a $4,200 car allowance and $50,000 in stock options (he already owned 48 percent of the company). Poole used the opportunity to cash in on tax credits; he also had won $442,000 for winning a blue marlin fishing tournament, “enough to keep the lights on,” he told the local Triangle Business Journal.

Waste Industries signed a lease for the top floor of a new Raleigh office building in October 1999. Soon after, the company traded a $60 million credit line with BB&T for a $200 million one with a BankBoston-led group of eight banks. Waste Industries had approached its credit limit with BB&T as it acquired ten companies in the first nine months of the year. (In so doing, it entered new markets in Mississippi, Alabama, and Virginia.)At an 8.25 percent average interest rate, the new financing was about two points more expensive, but the flexibility it offered seemed worth it to the company. A low share price ($13 a share at the time) prevented it from financing acquisitions by issuing new shares. Waste Industries’s debt load of $130 million was two-thirds its total capitalization, reported Triangle Business Journal, and its interest payments were approaching net earnings.

Damage by two hurricanes pushed down earnings and share price in the second half of 1999. A record 22-inch snowfall followed in January. The company reported improved profits and sales for the fourth quarter, but warned of the pending impact of rising diesel costs. Waste Industries used acquisitions to expand its facilities in the Greenville, South Carolina area. In 2000, the company also bolstered its operations in Atlanta.

Even after buying 15 companies in one year and 58 in the 1990s as a whole, Waste Industries was still growing too slowly to suit some analysts, noted Waste Treatment Technology News. The industry was consolidating rapidly and they felt the company was at risk of being forced to sell out to a rival. Waste Industries continued its buying spree, moving into Kentucky, West Virginia, and Washington, DC in 2000.

Company Perspectives:

Throughout its 30 year history, Waste Industries has provided its customers with responsive, cost effective and environmentally sound solutions to their solid waste disposal and recycling needs and currently operates 43 collections operations in the Carolinas, Virginia, Tennessee, Mississippi, Georgia, Alabama, and Florida. Waste Industries, Inc. is a recognized leader in the industry and continues to be one of the fastest growing Waste and Recycling service companies in the Southeast.

High Tech in 2000

Waste Industries used the Internet for branch communications and speedier customer service. In 2000, the company completed a project that replaced its satellite-based network with web-based e-mail and data transmission. It also redesigned its web site to allow customers to pay bills on-line, the first trash collection company on the East Coast to do so. These on-line payments were expected to cost half as much to process. Waste Industries also was using laptop computers to electronically govern the engines of its trucks. In 2000, it was beginning to plan its pickup routes using sophisticated planning software.

Waste Industries’s share price fell nearly to $8 in April 2000. In June, the company announced its first stock repurchase plan. The slump was in large part due to changes in the weather—hurricanes and record snow—and to the downturn that had affected most publicly traded waste management companies.

In June 2000, Waste Industries traded two of its collections operations in Tennessee and Georgia, as well as an interest in an Alabama landfill, for a landfill and collection operation in eastern North Carolina from Allied Waste Industries. Waste Industires had begun buying landfills again in 1999, mostly to prevent other private companies from controlling the rates it paid.

As the company turned 30 in 2000, Poole told Waste Age that one of the keys to its success was employees who could do “extraordinary work in a very ordinary business.” He also acknowledged the particular effort required to make garbage haulers feel good about their jobs. The company nevertheless had an annual turnover rate exceeding 40 percent—not atypical for the industry.

Waste Industries merged with the newly created Waste Industries MergeCo to form a new holding company, Waste Holdings, Inc., in April 2001.