Casella names Johnson president; reports loss
By Bruce Edwards
STAFF WRITER | December 05,2012
Casella Waste Systems has promoted chief financial officer Ed Johnson to the post of president and chief operating officer, replacing Paul Larkin, who left the company last month.
Casella also made two other announcements: a second quarter loss of $21 million and the completion of the sale of its Maine waste-to-energy plant.
“Ed Johnson brings the background and experience to the challenge of running a nimble, customer-focused business whose mission is growing cash flow and profitability,” company chairman and CEO John Casella said in a statement. “The board and I have immense faith in his ability to run the day-to-day operations of this company and succeed.”
Before joining Casella as chief financial officer in 2010, Johnson was CFO at Waste Services Inc., where he helped lead the operational and financial turnaround of that company.
Ned Coletta, vice president of finance and investor relations at Casella, was named the company’s new senior vice president, chief financial officer and treasurer.
Asked about the reason for Larkin’s departure as president after several years, Casella spokesman Joe Fusco would only say that “it was time for a change.”
The company’s fiscal second quarter financial results released Monday reflect a continued sluggish economy.
“The northeastern U.S. economy remained a difficult environment through our second quarter,” Casella said. “Recycling commodity prices, landfill volumes at our western New York landfills, and our roll-off collection line-of-business all underperformed our expectations in the quarter and, as such, we have lowered our guidance for the current fiscal year.”
Fusco added that the waste disposal business is a reflection of the overall economy.
“In a simple illustration, if people are buying fewer televisions and they’re producing fewer cardboard boxes that we recycle, and if people are eating out less, then they’re producing less food waste for example,” he said
For the quarter ended Oct. 31, the company lost $21 million, or 68 cents a share, compared to a net loss of $800,000, or 3 cents a share, for the same quarter last year.
Revenue was $120.3 million, down $9.6 million, or 7.3 percent from the same quarter last year.
The loss included one-time charges of $1.8 million in severance and reorganization expenses, a $100,000 charge related to the sale of the Maine Energy Recovery Company facility, a $3.9 million loss on derivative instruments, and a $9.7 million loss on debt related to the repurchase of the company’s second lien notes in October.
The company also announced that it completed the sale of the Maine Energy Recovery facility in Biddeford.
The city of Biddeford will pay Casella $6.65 million over 21 years and enter into a 10-year waste handling agreement, as well as a 10-year recycling collection agreement.
At closing, the company conveyed to Biddeford the land and cellular leases related to antennae on the stack.
The agreement allows for a post-sale transition period, during which the company has the option to operate the facility for up to six months. Casella has 12 months to dismantle all facilities on the property except for the stack that houses the cellular equipment.
The company plans to cease operations at the plant by the end of its fiscal 2013 third quarter and then begin to dismantle the facility.
A new transfer station in Westbrook, Maine, will handle the majority of the waste currently disposed of at the Biddeford waste-to-energy plant. Waste will then be transferred to other company landfills.
The sale of the waste-to-energy plant is expected to improve the company’s operating income by $7.9 million and cash flow by approximately $5.6 million a year.
Despite the disappointing second quarter results, Casella said the company’s strategy is on the right track.
“Recycling commodity prices hit bottom in September and began to rebound modestly in October and November as Chinese and domestic demand re-emerged,” Casella said. “We have taken what we believe is a conservative view on recycling commodity prices for the remainder of our fiscal year with pricing expected to remain consistent with current levels.”
He added that maximizing landfill capacity in western New York “remains a challenge given the depressed volumes of C&D (construction and demolition), special waste and residual streams from Marcellus Shale drilling activity.”
Casella employs 1,800 workers throughout the Northeast, with 500 in Vermont, including 133 in Rutland, the company’s headquarters.
To deal with the slowdown in business, the company laid off a few dozen workers in August. But Fusco said no further cutbacks are contemplated.
“We’ve done everything we’ve needed to do to align our business and our functions in the way we operate to succeed,” Fusco said. “What we’re waiting (for) now, we’ve hoisted our sails and we’re waiting for a breeze.”