Cover Story: INTEGRATED WASTE SERVICES
THE TRASHMASTER THAT'S TOP OF THE HEAP
Almost 30 years ago, young Harry Williams was tending bar at the Ted-Ra Club, a nightspot in Niagara Falls he had owned for a while. A stranger walked in, ordered a beer, and casually asked Williams whether he wanted to buy a pile of scrap tires. Williams shrugged. But in six months, he was out of highballs and into landfills--and demolition and trash collection.
Today, many companies later, James H. Williams is running the waste industry's star regional performer: Integrated Waste Services Inc. in Amherst, N. Y. Just five years old, Integrated is turning trash into cash. The company earned $1.74 million last year, up 164%, on revenues of $21 million. And over the past three years, sales and earnings have shot up an average of 151% and 166.7%, respectively--boosting Integrated to the top of this year's Hot Growth list.
Waste disposal is a sizzling business, of course, especially in the trash-choked Northeast. But it's also intensely competitive. In many markets, national behemoths Waste Management Inc. and Browning-Ferris Industries Inc. hold sway. Still, Williams, 59, knows what he's doing. From 1964 to 1983, he built or acquired 42 companies in waste disposal, construction, leasing, and real estate. He sold the waste operations to Browning-Ferris for $84 million, then took a six-year vacation under the terms of a noncompete contract. In 1989, however, he was back in business.
That's when he learned that Brian Swartzenberg, Integrated's founder and a former business associate, had died in a car accident. Integrated was a weak company with negative working capital. It had borrowed $3 million from a trust Williams had established for his daughter. Williams converted the debt to equity and took charge. Today, the trust owns a 33% stake. Williams himself holds options to buy an additional 11%.
WHAT A DUMP. Since 1989, he has bought a string of properties and service companies around Buffalo. Integrated Waste is, in fact, integrated: It demolishes buildings, collects trash, runs transfer stations and a recycling operation, and owns two landfills. One operation supplies the next, creating a continuous supply and low overhead. "This company can operate at the highest margins in the solid-waste business," says D. Paul Cohen, an analyst with Siebel Capital Management, Integrated's largest institutional shareholder.
Cohen and other investors expect even better things to come. One reason is Integrated's new landfill site in Farmersville, N. Y., which recently received local approval to start operating next year. The company will initially spend $12 million to develop the dump, but analysts think it could bring annual operating profits of $25 million by 1994. There's similar potential buried deep in the salt mines Integrated owns in nearby Livingston County. Williams wants to convert the pits to dumps for waste ash, which investors believe will bring in $8 million to $10 million a year by 1994. Williams says he's working on other acquisitions but wants to limit his search to businesses within an hour's plane trip. "There's so much inside that circle now, we won't have to go outside it for a while," he says.
Certainly, he's got the cash: Two public offerings in the last year have left Integrated with $13 million to play with. And he has recruited many of the managers who worked for him at Mader. He brought, too, unique experience with the regulatory process: Over the years, he has negotiated permits for 54 waste sites in New York and other states. That's a big reason Integrated looked good to Terren S. Peizer. The former Drexel Burnham Lambert Inc. junk-bond trader has bought 9.9% of its stock.
Both Williams and Peizer insist that the relationship is friendly. But even if it isn't, Williams effectively controls 44% of Integrated's shares. He needn't worry about tending bar again.Keith H. Hammonds in Boston