Casella Waste Systems, a Rutland-based recycling and waste management firm, announced the involuntary departure of former president and chief operating officer Paul Larkin earlier this week, amid discouraging financial results for the last fiscal quarter.
Casella spokesman Joseph Fusco wouldn’t elaborate on why the firm fired Larkin. “Paul did a lot for us, from a customer service standpoint and marketing standpoint,” Fusco said. “While his departure was not voluntary, with where we needed to go, we required some fresh perspective and some new leadership.”
Ed Johnson, Casella’s former chief financial officer, will replace Larkin.
“Ed Johnson is a person who understands the challenges in front of us and where we need to be as a company,” Fusco said. He said Larkin left the company on good terms and that the firing wasn’t due to a major mistake or fault on Larkin’s part.
Larkin couldn’t be reached for comment. According to a company press release, Larkin joined the firm in January 2008, and previously worked for Office Depot for 10 years, overseeing sales, supply chain and inventory there. Primary leadership for Casella still rests with CEO and board chair John Casella.
Casella also released its financial results for August to October 2012, which showed revenues of $120.3 million, down $9.6 million or 7.3 percent from the same period last year. The net loss to common shareholders came to $21 million for the quarter, compared with $800,000 for the same quarter last year. Operating income was down from $7.2 million last year to $4.4 million this year.
The firm attributed the revenue decline to lower recycling commodity prices, lower landfill disposal volumes, and lower roll-off container prices and sales. Shares for the company dipped to a year low yesterday, at $3.76, after a flurry of stock trades in the wake of the financial results, before closing for the day at $4.07.
At the end of 2007, before the recession, Casella shares were worth $13.04.
“The northeastern U.S. economy remained a difficult environment through our second quarter,” said CEO John Casella in a statement. “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.”
The company also lowered its guidance for the current fiscal year, projecting revenues between $468 million and $478 million, down from its estimate of $475 million to $485 million, announced in August.
In August, Casella also streamlined the company to cut costs, staff and inefficiencies. It incurred $1.8 million in severance and reorganization costs, but expects that the restructuring will save $6.5 million annually.
Al Kaschalk, a research analyst with Wedbush Securities who has followed Casella for about two and a half years, called the latest financial results “honestly disappointing. Some of it should have been expected. Others were just a little deterioration in the end markets specific to Casella.”
“This is a company that hasn’t been delivering results in the past four to six quarters, maybe even longer,” said Kaschalk, who specializes in waste management and broader environmental services. “There’s some good assets there; it’s just getting those assets to work for them.”
“That may come about through changes at the top. … Paul Larkin was there for a while, and hadn’t been all that good. So from an operating standpoint, that’s the person who’s taken the cut, given the results,” he said.
Fusco attributed the losses partly to larger economic stagnation and uncertainty, and said the company had done its best to combat the unfavorable climate. “We’re doing what we need to do to manage our cost structure and align our business,” said Fusco. “Those are things we can control. … What we’re waiting for is an economy that is improving.”
“We have unfurled our sails and are waiting for a strong breeze,” said Fusco. “Right now, from an economic standpoint in the Northeast, there is very little breeze, so to speak — barely a puff of air.”
He said that Casella’s business is closely tied with macroeconomic activity, especially in prosperous times when people tend to create more waste. More consumption means more waste. If people buy more microwaves this Christmas, for example, there will be more cardboard boxes to be recycled, Fusco said. “Our business is a real reflector of economic health and vigor.”
Fusco said after Casella processes and bundles its recyclables, it sells them to manufacturers that make materials like paper and plastic. Prices for those bundles have dropped, partly causing recent revenue drops. Similarly, he explained that with fewer one-off waste collection services, often associated with home building or remodeling, revenues have suffered.
Founded in 1975 in Rutland, Casella now employs about 1,800 people throughout the Northeast, with about 500 employees based in Vermont, said Fusco. The company primarily collects, transfers and recycles solid waste.
According to its latest annual report, it owns or operates 32 solid waste collection operations, 31 transfer stations, 17 recycling facilities, and 14 landfills, and operates in six states.
The company sold its Maine Energy Recovery Facility to the city of Biddeford, Maine, this quarter, for $6.65 million over 21 years. Casella expects that the sale of the incinerator will net $7.9 million more in operating income. Fusco said the facility had become a drag on earnings and profitability because of a poor market for electricity.
Analyst Kaschalk said the sale of the facility should help the firm’s financial profile and cash flow. “There’s high quality assets here,” said Kaschalk. “We’re just not seeing results. That takes time.”
