Western Waste stock hits six-month high as hauler reports earnings rise.

Western Waste Industries Inc.'s stock price topped a six-month high after the Torrance-based waste hauler announced last week sharp increases in both earnings and revenues as a result of numerous changes going on at the company.

Western Waste reported net income in the fiscal third quarter ended March 31 gained 65 percent to $3.37 million, or 22 cents a share, from $2.05 million, or 15 cents a share, a year earlier. Revenues rose 14 percent to $64.9 million from $57 million.

Western Waste's stock, which trades on the New York Stock Exchange, closed at $17.37 a share on May 3, the day after it reported its earnings. Western Waste's stock price hit a 52-week high of $22 a share last September, shortly after it announced plans to merge with Houston-based Browning-Ferris Industries. It slumped to $12 a share in October after the deal was called off, but in recent months has been climbing steadily.

Since the merger was called off, Western Waste has retained New York-based investment firm Salomon Bros. to increase shareholder value and also hired waste industry turnaround expert Ramsey DiLibero as its first chief operating officer.

"We are proud of our accomplishments," Kosti Shirvanian, Western Waste's founder and chief executive officer, told Wall Street analysts and reporters in a conference call after earnings were announced last week. "As you know it hasn't been too much fun in the past," he said.

Shirvanian and DiLibero stressed that the increase in earnings was due to increased prices for waste hauling and reduced overhead costs.

Western Waste has increased its waste hauling prices an average of 10 percent in California and has cut 100 of its 1,700 jobs in recent months, DiLibero said. The price increase and layoffs are part of Western's plan to increase efficiency, earnings and revenue, he added.

He noted that Western Waste has increased its earnings before interest and taxes as a percentage of revenues to 11.6 percent in the latest quarter from 6.9 percent a year earlier. The industry average is 15 percent, DiLibero and Shirvanian said.

"There is still progress to be made, but we are clearly on the right track," DiLibero said.

Rich Widrig, Western Waste's director of investor relations, said only 9 percent of the company's divisions at the end of fiscal 1993 were meeting or beating the industry average earnings ratio and that was increased to 33 percent over the next nine months.

Widrig said the improvement was due to changes being made throughout the company which operates waste collection services and landfills in six states. "It's not a massive restructuring," he said.

During the conference call with Wall Street analysts, DiLibero said he plans to stay at Western Waste as long as necessary to help increase its efficiency and not just for a year, as was stated in a recent Wall Street Journal article.

The afternoon following the conference call, one Wall Street analyst, who asked not to be named, said some of Western Waste's stock price increase may be due to DiLibero's reputation for spending a year at a waste company, cleaning it up and then selling it to another, larger waste company.

"The stock went down right after he said (he would be staying longer than a year), because people thought that meant there would be less of a chance it would be sold," the analyst said.

Shirvanian declined to comment on whether Western Waste was in merger talks. However, he said, the stock price gain puts it in a better position to acquire smaller waste companies if he does a deal involving stock.

Waste companies are now being bought for the equivalent of 75 percent to 85 percent of annual revenues vs. about 100 percent last year, the Wall Street analyst noted.

In discussing future business, Shirvanian said he had talked with Los Angeles Mayor Richard Riordan about prospects for privatizing the city's residential garbage collection.

Shirvanian said he believes private industry could service the city's 1 million residences at a cost savings of $5 million to $6 million a month or $60 million a year.

In the event of privatization, "I don't believe any major (waste) company would get all of it (the city's contract)," he said. Rather, a city contract would be divided into "portions" among the major Southern California waste haulers.