Garbage Collection King Gets Dumped On

Shareholder critics say WMX Technologies must continue reversing a headlong expansion and focus on core business

Sometimes, it seems, the handlers of garbage get no respect.

Even the world's biggest hauler of waste, WMX Technologies Inc. of Oak Brook, Ill., has recently been blasted in shareholder circles and the courtroom.

Some high-profile shareholders, including George Soros's investor group, claim WMX has been too slow to reverse a headlong expansion and focus on its core business of hauling garbage.

The criticism highlights a sobering period for a company that began with the merger of two family-owned trash collection companies and grew in two decades into a worldwide conglomerate in "environmental management," with annual revenues exceeding $10 billion.

This decade, rising competition and erratic earnings have forced WMX to reorient itself from go-go growth to a more inward-looking emphasis on shareholder value.

"WMX has to make the transition from a growth company to a value company, focusing internally and making shareholders happy - that's the whole gist of the situation," says one Wall Street analyst.

Some shareholders today call for a management shake-up. They also reproach management for last month's federal ruling that officials of Chemical Waste Management Inc., a WMX subsidiary, "followed a well-defined plan to cheat" developers of the nation's largest hazardous-waste dump out of their royalties. WMX denies any wrongdoing and is appealing the decision.

Finally, the shareholders question a recently announced raise for company chief executive officer Phillip Rooney.

Some solid progress

But beneath the haze of foul events and shareholder attitudes surrounding WMX lies solid recent performance, securities analysts say.

The company is ahead of schedule in selling $1 billion of underperforming assets. Cash flow from operations rose from $500 million in 1995 to about $700 million in 1996, according to company estimates. Moreover, earnings per share jumped from $1.24 in 1995 to an estimated $1.82 last year and should swell to $2.05 in 1997, predicts Marc Sulam, a securities analyst at Donaldson, Lufkin & Jenrette in New York. WMX is on the firm's recommended buy list.

"There are shareholders who would like to see the pace of efforts [at restructuring] quicken, and I think you will see some more actions by WMX in the next several weeks," Mr. Sulam says.

WMX is perhaps the most spectacular example of a company that has turned trash into heaps of cash. For two decades beginning in 1970, WMX bought hundreds of companies around the world and saw its annual income grow at nearly 30 percent. Today it operates in 32 countries, with 73,200 employees and nearly $18 billion in assets.

This decade, though, many company operations have faltered even as tough rivals have muscled into the market. As WMX earnings have traced a jagged line, so has the price of its stock, stumbling from a high of more than $45 in 1992 to a close on Friday of $32.88.

In the face of shareholder criticism, WMX since 1995 has shaved company assets by about 5 percent and announced plans to buy back $25 million in shares. It has sought to return to its "core competency" in waste management in North America, building some 200 customer centers that both market company services and seek to swiftly meet customer needs.

"Our company's challenge and efforts are to be much more responsive to customer needs and to focus on our customer in a way that is new to our industry," says WMX spokesman Bill Plunkett.

Critics frustrated

The company's overhaul has not been fast or deep enough for some investors. Since disclosing a 5.2 percent stake in the company last spring, the Soros investor group has pressured management to take more drastic steps.

Last month, in a filing with the Securities and Exchange Commission, Soros Fund Management said it was "frustrated by the lack of progress" at WMX and doubted "the resolve of management" to enhance shareholder value."

Lens Inc., a Washington-based investor group with 750,000 WMX shares, is goading WMX to spin off more assets and shake up its board of directors. "The company needs to get rid of everything but its core business, which we see as North American garbage," says Lens principal Nell Minow. "The company performance over the past five years has demonstrated convincingly that its conglomerate strategy, with partial ownership of the subsidiaries, is contrary to shareholder value over the long term."

Some investors chafe at how Mr. Rooney recently broke a pledge not to impose yet another charge against earnings to pay for restructuring. Last month as part of its sale of assets, WMX announced it will divest its 19.5 percent share of Wessex Water PLC and record a charge of about $88 million in the fourth quarter.

Also, the court ruling last month ordering WMX to pay $91.5 million to the original developers of a hazardous-waste dump in Emelle, Ala., might result in a charge. Rooney last May said the company did not plan to log additional charges.

Still, not all the noise from shareholders is catcalls. "We have communications with shareholders and, although not all of them agree on the most appropriate course, we have received plenty of support on the strategy we're following," Mr. Plunkett says.

Many analysts, although impatient, apparently agree that management is on the right track and say radical steps like a top-management shake-up are unnecessary. Analyst Sulam says, "The current management understands the business and is moving in the right direction."

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