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Financial Problems Plague Casella Waste

07 Jan

Company has history of financial troubles & anti-competitive business practices

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On December 3rd, 2012 shares of Casella Waste fell to their lowest price in more than two years.

$9.7 million of the loss was related to paying off debt, and makes up only a fraction of the hundreds of millions of dollars owed by Casella.

Wunderlich Securities analyst Michael Hoffman called the company’s quarterly results “just plain ugly.”

Source: “Casella Waste shares tumble on lower guidance cut,” Business Week, Dec 4, 2012

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The same day Casella posted a net loss to shareholders of $21 million it replaced President Paul Larkin with the company’s current CFO Ed Johnson.

No reason was given for the change of president, though there was speculation at the city council meeting that it may have had to do with insider trading and the fact that Larkin had sold 12,582 shares of Casella stock on July 10, 2012 at an average price of $5.24 a share, just prior to a sustained drop in value in following months.

Source: “Casella Waste Names New President as Losses Mount,” Waste Age, Dec. 4, 2012

Casella Waste Systems Inc. (CWST) President & COO Paul Larkin Sells 12,582 Shares,” Guru Focus, July 10, 2012.

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Casella was sued by shareholder over violating the Securities Exchange Act by intentionally concealing the company’s true financial condition.

KTI stock was valued at $23.50 a share and Casella’s was valued at $27 a share when the companies’ merger was announced in January of 1999. By December, KTI stock had dropped to $9, while Casella had dropped to about $18.56, with the merged company’s stock valued at $7.

Source: “Shareholder sues refuse handler KTI accused of hiding financial woes,” Bangor Daily News, April 12, 2000.

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 Hermon disposal business EEI sued Casella in 2005 for anti-competitive practices.

The Environmental Exchange Inc. alleged that Casella violated state antitrust laws by entering a preferential bid to haul waste Maine biomass plants. The suit raised concern about Casella’s “vertical integration” in the Maine waste market, with the company owing and/or operating dumps, incinerators, sludge facilities, CDD processing, and trucking, effectively fixing prices of disposal to force competition out of business, giving Casella a near monopoly on waste handling in Maine.

Source: Bangor Daily News, Hermon business sues Casella Waste disposal firm alleges violation of antitrust laws, March 3, 2005.

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Vermont’s AG issued a $1 million fine to Casella for anti-competitive actions.

If Casella had been penalized for every contract in violation, the company would have faced over $24 million in penalties. Casella negotiated the fine down and paid $1,000,000 for anti-competitive actions and bad faith negotiations in contacts with Vermont municipalities and consumers, which is the largest settlement with a Vermont business in the State’s history.

Source: “Casella to pay $1M penalty for anti-competitive contracts with consumers,” VT Digger, August 13, 2011

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Casella’s bonds have been at junk bond status in recent years.

As of early 2012 Casella carried over $594 million in adjusted debt, much of which will come due in the next two years. The company has become so in debt that its market stratagy is to rely on public funding for its private profiting operations.

The company depends on tens of millions of dollars in tax exempt solid waste revenue bonds, to be repaid by Maine taxpayers should Casella default.

Sources: “Casella Waste Systems ‘B+’ Rating Affirmed, Various Rating Actions On FAME Revenue Bonds; The Outlook Is Negative,” Standard & Poors Research Update, Jan 11, 2012

 
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Posted by on January 7, 2013 in Current Events

 

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