Casella Takes Some Hits in Q2, But Posts Strong Operational Results

Rutland, Vt.-based Casella Waste Systems faced some headwinds in the second quarter, but still posted a 6.5 percent year-over-year growth in revenues. For the period, Casella saw $154 million in revenues, up $9.3 million from the second quarter of 2016.

The big hit for the company was the decision to close the its landfill in Southbridge, Mass. Casella had been pushing for a capacity expansion, but facing regulatory and political roadblocks and community opposition, Casella decided the costs to proceed would be prohibitive. Thus it is opting to close the landfill at the end of 2018 when it reaches its capacity.

The company has roughly 300,000 tons of capacity remaining as of June 30.

“As we work through the challenges at the site over the last three years, we have already ramped down volumes to conserve capacity and to enhance returns on the remaining tons places,” Casella Chairman and CEO John Casella said during a conference call with analysts. “With this ramp down, we believe that we have minimized the comparative headwinds when the site is fully closed in late 2018.”

As a result of this, the company incurred a $64.1 million landfill closure charge. This pushed the firm to post a net loss of $53.7 million for the quarter compared to net income of $5.2 million for the same period in 2016.

Two other headwinds for the company were healthcare costs, up 117 percent year-over-year to $2.2 million, and leachate costs, which were up $1 million, an 84 percent rise stemming from abnormally high rain in the Northeast. Casella said it expected those costs to normalize during the rest of the year.

Despite those hits, Casella posted strong, underlying operational results.

“We finished the quarter ahead of plan despite the headwinds and … the challenges of operating in a period of unusually heavy rain and remain on track to exceed our 2018 targets,” Casella President and COO Edwin Johnson said during the call. “Disposal capacity continues to tighten in the Northeast market as permanent site closures are reducing capacity and strong economic and construction activity are driving higher volumes. We believe that this positive pricing backdrop will continue into the future as additional site closures including Southbridge are expected over the next several years.”

Looking ahead, Casella is introducing two new areas of focus as part of its core strategies—reducing general and administration (G&A) costs and improving efficiencies and allocating capital to balance delevering with smart growth.

Casella also said the company sees more than $500 million in acquisition opportunities in its markets.

“We've identified $200 million or so, $250 million of core tuck-in acquisitions, small acquisitions that sit across the Northeast,” Casella said. “And on top of that, there is probably in our estimate four or five, $40-million to $50-million companies that sit across the Northeast…. . We have a business development director acquisition director in place today, he is sourcing opportunities and then turning those over to the region teams.”

Some other highlights from its quarter: