WSJ article.
FWIW, I am a WMI long...
Major Business News -- WSJ Interactive Edition
Waste Management Aide Collected
$16.5 Million Before Net Shortfall
By JEFF BAILEY
Staff Reporter of THE WALL STREET JOURNAL
Waste Management Inc.'s No. 2 executive, Rodney R. Proto, collected
$16.5 million by selling shares in the waste hauler during the
second quarter, the same period in which the company was hit by an
earnings shortfall that sent its stock plunging earlier this week.
Including the sales by Mr. Proto, Waste Management insiders who are
required to report their trading activity sold slightly more than
one million shares in May at prices between $51.94 and $56.41. The
stock closed Thursday at $33.9375, unchanged, in New York Stock
Exchange composite trading, after plunging $19.625 on Wednesday,
following the company's disclosure that its second-quarter profit
would be lower than expected.
First Selling Opportunity Since '96
The heavy selling by 13 insiders came during the first selling
opportunity they had had since 1996, according to a spokeswoman,
Cherie Rice.
Constant acquisitions, and Securities and Exchange Commission stock
registrations, have severely limited insiders' ability to sell stock
in the Houston-based company, Ms. Rice said in comments made before
this week's disclosure and stock plunge. Stock and stock options are
"a big part of their compensation," Ms. Rice said. "And they haven't
had access to it for a while."
Thursday, Ms. Rice said: "We issued the earnings warning as soon as
we determined we were going to be short of expectations. That was
several weeks after the stock sales" by insiders. She added that Mr.
Proto didn't wish to comment.
Mr. Proto, the company's 50-year-old president and chief operating
officer, was paid $862,308 in salary and a $2.2 million bonus last
year. He also was granted options to buy 1.5 million Waste
Management shares.
In February 1998, Mr. Proto exercised older options to buy 360,000
shares, indicating that he took in at the time $11.4 million, or
about $31.73 a share, on the options. After holding for slightly
more than one year, qualifying for the lower capital-gains tax rate,
he sold 300,000 of the shares on May 11 and May 12 for between $55
and $55.50, indicating proceeds of about $16.5 million. He kept
60,000 of the shares, bringing the total he owned to about 130,000
shares.
Ms. Rice characterized the transactions as having "doubled" Mr.
Proto's ownership.
In its statement late Tuesday disclosing that net income in the
second quarter and in following periods would be lower than
expected, Waste Management said "revenues weakened toward the end of
the quarter, compared to our expectations." The company wouldn't be
more specific about when the weakening occurred.
With some seasonal variations, Waste Management, with annual revenue
of about $13 billion, has monthly revenue of a little more than $1
billion. The company said second-quarter revenue would fall $250
million below expectations. The company wouldn't break down the
shortfall between the quarter's months.
Moves by Other Executives
According to a compilation by Federal Filings of Securities and
Exchange Commission reports: Douglas G. Sobey, senior vice
president, sold 256,750 shares for between $55.07 and $56.41,
leaving him with 5,150 shares owned; Miller J. Matthews, senior vice
president, sold 105,717 shares for $55.09 each, and retained 486,000
shares; David Sutherland-Yoest, senior vice president, sold 110,000
shares for $54.97 each, and retained 207,013 shares. Those sales
occurred by May 26. The executives declined to comment, according to
Ms. Rice.
Waste Management said in its statement late Tuesday that
second-quarter net income would be between 67 cents and 70 cents a
share, compared with the 78 cents that analysts had been expecting.
For the full year, the company now expects per-share net of $2.65 to
$2.70, instead of the $3.01 that analysts had forecast.
The stock plunge reflects that lower expected profit and a general
drop in investor esteem. The company's price-to-earnings ratio was
knocked down to about 13 because of uncertainty and slower growth.
The P/E was about 18 before the stock's plunge, when analysts felt
certain of the company's performance and expected more rapid
earnings growth.
Waste Management said little about the cause of the revenue
shortfall. It appears now that the problem will affect future
quarters, it said. And the company expects to have a better
explanation on Aug. 3, when it expects to report quarterly results.
Thomas H. VanWeelden, chairman and chief executive officer of Allied
Waste Industries Inc., which is in the process of acquiring No. 2
waste hauler Browning-Ferris Industries Inc., said it wasn't a
matter of his company or others actually swiping $250 million of
customer revenue.
"No, we don't have the $250 million of work," he said. He noted
that, multiplied by four quarters, that would make a $1
billion-in-revenue company, and that losing that much work in one
quarter seems impossible.
He chalked it up to a likely forecasting problem, noting that on a
base of $13 billion in revenue, even a 1% error "is huge."
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