Allied Waste Industries, Inc.

FOUNDED: 1987

Contact Information:

HEADQUARTERS: 15880 N. Greenway-Hayden Loop
Scottsdale, AZ 85260
PHONE: (602)423-2946
FAX: (602)423-9424
EMAIL: info@awin.com
URL: http://www.alliedwaste.com/

OVERVIEW

Allied Waste Industries, Inc. is a leading domestic non-hazardous solid waste management company based in Scottsdale, Arizona. Although Allied has a national presence, the company maintains a strong local presence through its decentralized management philosophy. Its objective is to operate collection, transfer, recycling, and disposal businesses in each of its major markets. Allied is a focused company, adhering to a simple operating strategy of vertical integration. The company aims to build efficient, vertically integrated operations that unite the strengths of the collection and disposal operations it has acquired and developed over time. It also seeks to move waste from its collection routes in major population centers to Allied's cost-efficient suburban and rural landfills. By owning the waste disposal facilities that service its collections and improving operating efficiencies, Allied has been able to maximize its operating margins and thus its overall profitability. Allied currently conducts operations in 18 states, with 81 collection companies, 21 recycling facilities, 43 transfer stations, and 56 landfills.

COMPANY FINANCES

Allied is the fifth-largest solid waste management company in the United States as measured by revenues. The company's revenues have grown from approximately $9 million in 1991 to $875 million in 1997, placing Allied in the top ranks of solid waste companies in the United States. Consequently, Allied Waste Industries, Inc. ranks among the top 10 Arizona-based companies. As of 1997 Allied's revenue mix consisted of 59 percent collection, 25 percent landfill business, 7 percent transfer, 3 percent recycling, and 6 percent other.

ANALYSTS' OPINIONS

In October of 1996, Fortune magazine listed Allied Waste as twenty-fifth among the 100 fastest growing companies, based on $33 million added to sales with the acquisition of 3 landfills, 15 garbage-collection companies, 2 recycling facilities, and 3 transfer stations. In the late 1990s the company was receiving widespread attention from Wall Street. Many are particularly impressed by the quality of its management. According to some analysts, Allied is large enough to gain access to capital markets for more consistent, acquisition-driven growth, and the company's presence in 18 states provides geographic diversification, reducing the impact of regional economic downturns. Still, others believe a lack of access to new equity could hinder the company's growth plans and note that the company is highly leveraged. Nonetheless, Allied Waste is expected to be one of the most aggressive acquirers in the industry.

HISTORY

Allied Waste is the product of a merger between several small regional solid waste companies. Thomas H. Van Weelden, Allied's president and CEO, is a second-generation executive in the solid waste industry, having begun his career in a family owned waste company serving Chicago. In 1975 Van Weelden formed an integrated waste management company in southern Illinois. Meanwhile, Roger A. Ramsey, now chairman of Allied's Board of Directors, had co-founded the waste management company Browning-Ferris Industries, Inc. Upon leaving Browning-Ferris, Roger Ramsey formed a private investment company and some years later returned to the solid waste industry with a small company named Allied Waste. Ramsey and Van Weelden merged their companies to form the core of the current business.

STRATEGY

Vertical integration of collection and disposal assets in each market is the single most important element of the company's business strategy. It implements this strategy by acquiring waste disposal assets and by swapping assets with other companies to achieve greater integration in particular regions. Building initially on a base of landfills, Allied then adds collection and, if necessary, transfer capabilities to lower the cost of hauling over longer distances. This integration of waste operations, or waste internalization, is critical to the company's success because it provides guaranteed waste flow into the company's landfills and minimizes the dependence of its collection business on competitors' landfills.

Allied's strategy also focuses on the inevitable results of stiffer regulation and the increased population density of urban areas. As time passes and existing disposal sites in urban areas approach capacity, waste must be transported farther from urban cores to larger regional landfills. Allied's basic strategy is to identify regions where these changes are occurring or are about to occur and to acquire facilities to take advantage of them.

INFLUENCES

The non-hazardous waste collection and disposal industry is highly competitive and requires substantial capital and human resources. National waste management companies and several regional waste management companies have significantly greater resources, but Allied has the advantage of well-regarded, experienced management: 60 percent of the company's managers have more than 20 years of experience in the industry.

Allied exits markets if it believes that achieving vertical integration in accordance with its business model will not be cost-effective. Each of the company's acquisitions and divestitures are consistent with its plan to increase its waste internalization rate and focus on markets where there are good opportunities for future growth. For example, the 1996 acquisition of Laidlaw's waste management assets opened up 17 new markets, including 6 Canadian provinces. However, the Canadian operations, while solid in themselves, were not in markets that Allied could fit into its business strategy. They were sold off, and the resources were freed up to integrate more promising assets. Allied also sold its collection operations in Gaithersburg, Maryland, where 100 percent of the collected waste was disposed of at third-party landfills. The company's Chiquita Canyon landfill in Los Angeles, California, was sold because Allied does not have collection operations in the market. Meanwhile, an addition of a landfill to the company's Carolina operations completed the market entry initiated in 1996 with the acquisition of Container Corporation of Carolina. Allied prefers to own every aspect of the waste management operation in a particular area, from pickup to landfill.

CURRENT TRENDS

The U.S. solid waste market has been consolidating since the late 1970s, driven by increased regulation that fundamentally altered the economics of waste collection and hauling operations in favor of larger regional facilities. The company expects the trend toward consolidation to continue because many independent landfill operators lack the capital resources, management skills, and technical expertise needed to comply with the complex regulations.

Another factor affecting the waste disposal industry is the trend toward outsourcing government services to commercial vendors. In 1997, Allied outbid 26 competitors to purchase all the waste disposal assets of San Diego County for $184 million, the largest privatization of government solid waste disposal services to date, which included four landfills, a transfer station, a recycling facility, and several rural collection points.

EMPLOYMENT

Many of Allied's employees come from local companies it acquires. By maintaining continuity in each community it serves and allowing the local districts autonomy in operations management, the company encourages employee and customer loyalty.

SOURCES OF INFORMATION

Bibliography

Allied Waste Industries, Inc. Home Page, 3 August 1998. Available at http://www.alliedwaste.com.

"Allied Waste Industries, Inc." 5 May 1998. Available at http://www.marketguide.com.

"Allied Waste Industries, Inc." Hoover's Online, 26 July 1998. Available at http://www.hoovers.com.

Allied Waste Industries, Inc. 1997 Annual Report. Scottsdale, AR: Allied Waste Industries, Inc., 1997.

"Allied Waste Industries Recommended by San Diego County Chief Administrative Officer for Landmark Privatization of Solid Waste System." Envirobiz, 30 July 1997.

"America's Fastest-Growing Companies." Fortune, 14 October 1996.

The Corporate Directory By Walker's 1997. San Mateo, CA: E. Tollenaere Walsh, 1997.

Gilbertson, Dawn. "Small Arizona-Based Waste-Management Company Plans __BODY__.5 Billion Acquisition."Knight-Rider/Tribune Business News, 19 September 1996.

Reagor, Catherine. "New Partner to Help Allied Waste." The Business Journal, 10 February 1995.

For an annual report:

telephone: (602)423-2946

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Allied's primary SICs are:

4952 Sewage Systems

4953 Refuse Systems

4959 Sanitary Services