211 - MANCIIKSTKK HKKAl-1). S jH in ljx , Aiit:. 211, I!IH:| BUSINESS Engineers Interviewed Plumber gave up Why user-fee for Union Street bridge pipes for his art plan delayed Once-scomed debunker has the last laugh ... page 10 ... page 16 ... page 6 m ■Just about a year ago, Jim Chanos. a 25-year-old, growth — that’s the signing up of new customers (both further expansion into new markets by W-M will lanky 6 ft. 2 in. analyst out of a small Chicago cities and corporations) for waste removal — is sharply be curtailed by wary regulators. brokerage firm, Gilford Securities, fired off a stinging falling at a precipitous rate . that the company’s Another Chanos thought which may seem far­ report on one of the country’s fastest-growing rapidly deteriorating growth is being masked by fetched to many — but not to our bear; financial conglomerates. Dan Dorfman "overpriced acquisitions” and price increases. He thinks there’s been enough adverse publicity to His blunt message: The company’s a house of cards In ’80, ’81 and ’82, W-M reported respective saies prompt the government to push for on-site waste propped up by creative accounting. Syndicated increases of 23.6, 15.2 and 13.7 percent. However, if disposal, rather than leave it in the hands of someone He urged the firm ’s primarily institutional clients to you strike out price increases and acquisitions, reai else to cart off the wast (like W -M ). And to reinforce Showers tonight; Manchester, Conn. dump the stock if they owned it; moreover, he labeled Columnist growth in those three years amounted to just 9.1, 6.7 this, the government could make the generators of it as a super short sale (a bet on a lower stock price). and 3 percent. waste (the corporations) liable for any problems that sunny Tuesday Monday, Aug. 22, 1983 As a result of some persudsive arguments, he did For all of ’83, Chanos is projecting total sales growth occur elsewhere. — See page 2 Single copy: 25<t manage to drum up a good chunk of commission of between 6 and 10 percent — but in terms of real If that were to happen, observes Chanos, there goes business on the short side. case. Unlike Baldwin, Chanos doesn’t regard W-M as growth, he thinks there may be none, or, at best, a the business. But at the very least, an aroused Uncle Well, the stock. $24at the time, subsequently shot up a potential bankruptcy. His major argument is that measily 1 percent gain. Sam could prompt many companies to cut back on- Ulanrhratrr Mrrali to about J50 — with Merrill Lynch and a smaller Wall Street is paying a grossly excessive price for An analysis of W-M’s balance sheet for the 12 their ^ waste generation — much as in energy, brokerage house. Prescott, Ball & Turben, touting it what’s perceived to be a growth company whose months ending this past June shows operating cash consumption. like crazy. operations, he says, are no longer growing. flow — that’s available cash after investments, W-M’s response: Chanos is all wet. He’s picked up- Needless to say, Chanos took a lot of flak, especially Chanos’s case — a preview of which he outlined in expenses and dividends — actually minus $54.1 isolated facts and drawn erroneous conclusions, says' from the company, which branded his analysis an interview — will be spelled out in a highly negative million. Thus, the company, says Chanos, was forced W-M senior vice president of finance Donald Flynn. Hurricane shoddy and irresponsible. But Chanos stuck to his ’’sell” report on the company which he’ll be sending to borrow and issue stock to cover its latest 12-month For starters, Flynn points to good financial muscle guns and today he’s a hero because the company he clients in about two weeks. He’s already discussed his dividend payouts. Moreover, says Chanos, the deficit — with cash and liquid investments of $82 million, Phone pact attacked. Baldwin-United, turned out to be one of the thinking with a number of them and this has resulted, in operating cash flow was realized despite a over$250 million of borrowing capability and a capital death toll greatest stock market disasters df the past year. Chanos tells me. in both the sale of the stock and the slowdown in the company’s capital spending. structure with less than 20 percent debt. At press-time, Baldwin’s shares were trading at initiation of some short positions. HERE ARE some other things that disturb Chanos: He points to consistent gains in the return on equity around $7.25, and there’s lots of speculation that the “ 1 was amazed that Wall Street swallowed the • For the 12-months ending June 30, the company in recent years, noting that the lower number of the company is a basket case. Baldwin story without checking the facts... and now shows a deteriorating return on equity — an estimated 12-month June ’83 period was chiefly a one-shot; reaches 18 Well, our sharp-eyed debunker is back again with a they’re doing it again with Waste Management,” he 19.4 percent, vs. 22.1 percent in ’81. reflection of a $96 million equity offering last w ill m ean HOUSTON (U PI) — The death new target — Waste Management, the nation’s says. • After-tax returns on total capital topped out at 15 November. As for tbe deficit in operating cash flow, toll from Hurricane Alicia reached largest waste disposal company (’82 sales: $966 Chano’s view is that W-M is basically a no-growth percent in ’79. As of the end of last June, it was 13 Flynn attributes that to the borrowing of funds (plus 18 and the Coast Guard suspended million). company which merits no more than a regular market percent. On the other hand, W-M’s major competitor, the use of stock) to pull off the $170 million acquisition searches for two more people Again, Chanos is pretty much of a lone voice. True, multiple of around 13. That would put the stock, as Browning-Ferris Industries, went from a 10.4 percent last year of Chem-Nuclear. , missing from boats caught in the W-M did come under intense pressure last March in Chanos sees it, ’’where it belongs — in the low ’30s.” In return on capital in ’79 to 13.7 percent as of last March That was one-shot and non-recurring unless we do storm’s fury. the wake of allegations of illegal dumping of waste — other words, our W-M bear is projecting a wicked 40 31. another major acquisition, says Flynn. price hikes The latest deaths adbd to Alicia’s which remain the subject of a criminal grand jury percent decline. Chanos blames W-M’s falling returns on both As for slowing growth this year, Flynn believes that list 6nday were a man who died in a investigation and a slew of civil suits. But W-M’s On the surface, that would seem illogical — given capital and equity on the problem of paying too much will go by the boards in the face of a peppier economy.' By Frank T. Csongos Workers of America, and Rex fire at his home and two men whose shares, which in a matter of a few days tumbled from the company’s impressive 30 percent growth rate in for acquisitions. While he wouldn’t make any specific earnings- United Press International Reed, vice president for labor bodies were found floating in a about $60 to $40 in response to the news of a grand jury earnings over the past 10 years. Another telltale clue that something’s awry, in forecasts, he thinks a showing of $2.70 a share this relations of the American Tele­ flooded bayou. investigation, have since rebounded to about $53. However, per-share earnings in the first half were Chanos’s view, is the brisk selling by corporate year and between $3.50 and $4 in ’84 "are reasonable in WASHINGTON - With a tenta­ phone & Telegraph Co. Damage estimates, originally That’s equivalent to a fancy price-earnings multiple up a meager 4.3 percent on a below-average 8.9 insiders. In the past 12 months, 11 officers and light of everything known today.” of 22, based on the past 12-month earnings. tive nationwide pact already in Reed called the agreement a set at $1 billion, also were rising percent sales gain — a reflection of increased costs of directors of W-M unloaded nearly 563,000 shares. And Flynn flatly rejects the idea that the waste disposal - Obviously. Wall Street — especially the institutional place — one that might mean "balanced settlement” but said it and Sen. John Tower, R-Texas, cleanup, a lower level of business in the chemical that includes nearly 11 percent of the direct holdings business could become extinct. ” It’s been here for 100 investors who own about half of the company’s 47'/ii higher prices for consumers — could result in higher telephone who toured the devastated areas generating industries and a non-recurring loss. of W-M chief Dean Buntrock and another 6 percent of years, it performs a vital service and it’s here to stay. union and Bell System ofFicials million shares — is signaling loud and clear that it his indirect holdings. rates. during the weekend said Alicia believes the investigation and the suits will be sought to work out local agree­ “ Wage increases do impact on may prove to be the costliestTexas CHANOS SEES more of the same puny growth in Chanos believes the negative national publicity A postscript on Chanos: Last March, with Tandy in resolved with minimal fuss.