Waste company cleans up by aggressively cleaning up

While many chief executive quarters are protected by flinty-eyed security men , the entrance to Dean Buntrock's office is guarded by a grizzly bear. The soft spoken board chairman of Waste Managment Inc. appears to be a contemplative individual, analyzing each sentence before uttering it. So the stuffed bear, shot by Buntrock, throws light on the chairman's action-oriented qualities.

And Waste Management has prospered by drawing on both Buntrock's ability to analyze appealing untapped markets and his willingness to act aggressively to penetrate new markets by building or acquiring new businesses.

Buntrock modestly allows that the firm has "an ability to analyze the cause and effect" of new business situations "and what the role for a company like ours is" in emerging markets.

As a result, the trash-collecting company Buntrock and his relative H. Wayne Huizenga launched in 1968 has become the largest garbage-handling firm in the United States. Waste Management these days calls at the curb of more than 1.6 million households and picks up refuse at more than 164,000 businesses.

Now Waste Management is in the midst of an ambitious plan to strengthen its existing business lines while starting operations in new, but related, fields. For example, WMI has recently:

* Decided to purchase a new ship which will vastly increase its ability to incinerate some chemical wastes at sea. It is somewhat easier to get approval to burn wastes at sea than in some community's backyard.

* Laid plans to join with another company in aggressively marketing recycled solvents which previously had been buried at WMI dumps.

* Landed three major new contracts to clean Jeddah, Saudi Arabia; Cordoba, Argentina; and Caracas, Venezuela.

* Started a new business, dubbed the Environmental Remedial Action Division (ENRAC), to get its share of the $1.6 billion Congress has appropriated for cleaning up abandoned hazardous chemical disposal sites.

As important as its business-building plans, WMI has been able to avoid mindless expansion. While it has acquired scores of companies, each acquisition gets close scrutiny. For example, WMI recently decided not to proceed with the planned acquisition of the Rollins Environmental Services unit of RLC Corporation, even though it badly wanted Rollins's three chemical disposal incinerators.

"The price we agreed to did not take into consideration the additional capital [needed to bring the operation up to WMI standards]," says WMI's senior vice-president and chief financial officer Donald F. Flynn. "And when we assessed that, the transaction did not look as attractive to us."

The company has long been adept at spotting tempting opportunities. WMI started as a trash-collection business. But Buntrock figured that tougher federal regulations on disposal of hazardous chemicals contained in the Resource Conservation and Recovery Act of 1976 (RCRA) would create a major new business. So WMI moved aggressivley into chemical waste disposal.

Propelled by RCRA rules, revenues at WMI's Chemical Waste Management unit have skyrocketed to $85 million and are growing at a 50 percent annual rate.

"Waste Management has greater resources in chemical waste than anyone else," admits Walter E. Skowronski, investor relations director at SCA Services Inc., a competing chemical and municipal waste disposal operation.

"In terms of expansion of capabilities, they have expanded more rapidly by acquisition of other companies," adds Browning-Ferris Industries vice-president Robert Johnson, the second largest disposal firm in the nation.

It's WMI's strong hold on the international market which allows it to outstrip such successful residential and chemical waste disposal businesses as Browning-Ferris and SCA Services in revenues, profits, and shareholder equity, admits a Browning-Ferris financial spokesman.

From the time WMI went public in 1971, revenues have soared at a 24.9 percent annual rate to $560 million in 1980. Profits have risen at an even faster 32.3 percent annual clip to $54.9 million in 1980. And while SCA sported a 15.2 percent return on shareholder equity in 1980, WMI returned 22 percent to its investors.

"We have not had the problems operationally and in management the competition has experienced," Buntrock says when asked to explain his firm's fatter financial ratios.

Still WMI finds some clouds on its corporate horizon. One reason its business has been so profitable is that in some areas of the country chemical waste disposal sites are in very tight supply. If new sites can be brought on line by competitors, WMI's margins may slip.

"I would expect that to happen in the next two to five years," says Thomas M. Corkill, a Chicago-based securities analyst with Blunt Ellis & Loewi Inc. "But it is gravy until then."

But along with the gravy comes considerable risk. For example, the Supreme Court of Illinois recently affirmed a lower court decision requiring SCA to remove all the wastes which had been buried at its Wilsonville site. The process could cost millions of dollars even in the unlikely event the firm could find another dump site willing to take the wastes.

"Anyone who owns a hazardous landfill could be subject to the same kind of suit SCA is involved in at Wilsonville," notes Rolland Williams, an analyst with E. F. Hutton & Co.

Still, opportunities for Waste Management seem to develop faster than risks. For example, the Reagan administration's plans to cut federal funding for cities make it likely some municipalities will seek ways to cut garbage pick-up costs. One way is to to have WMI rather than a municipal work force handle the chore. "Absolutely that will happen," Buntrock predicts.

"They are moving faster than anyone else in all directions -- foreign contracts, incineration, chemical treatment, landfills," concludes Hutton analyst Williams. "When you move fast, chances are you will make mistakes. So far they haven't made any."