Casella Waste Systems Sends Letter to Stockholders in Connection with 2015 Annual Meeting of Stockholders
Urges Stockholders to Vote the WHITE Proxy Card
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The letter, which includes a WHITE
proxy card, outlines the significant and decisive actions that Casella's
Board and management have taken to enhance Casella's long-term prospects
and best position Casella to create value for its stockholders, and
recommends that stockholders vote on the WHITE
proxy card FOR the election of all
three of Casella's highly qualified and very experienced nominees,
As previously disclosed,
The full text of the letter is as follows:
Dear Fellow Casella Stockholder:
2015 has been an exciting year for
While your Board has been taking decisive action to enhance the value of
your investment in Casella,
Over the past two and a half years, Casella has achieved significant progress and momentum in executing on its strategy, improving its financial and operating performance and growing stockholder value. As such, we question the judgment and logic of JCP in forcing upon Casella a costly and distracting proxy contest to replace highly qualified, experienced and valued members of your Board with its own candidates without providing stockholders with any credible arguments as to why its candidates, one of whom has no waste management industry experience whatsoever and one of whom has never served on a public company's board of directors, are more qualified than your Board's nominees to drive further stockholder value creation. We do not believe that JCP has proposed any director candidates who have experiences and competencies that would expand the depth and breadth of your Board. Nor has JCP shared with Casella's management or your Board an alternative strategic plan or any specific ideas for improving Casella's prospects or enhancing stockholder value.
You now have an extremely important decision to make about the future of
Casella and who should oversee Casella's ongoing efforts to further
improve its financial and operating performance and grow stockholder
value. Once you review the facts, we hope you will agree to vote on the WHITE
proxy card FOR ALL your Board's
nominees -
YOUR BOARD HAS TAKEN DECISIVE ACTION TO DRIVE CASELLA'S STRATEGIC EXECUTION, DRIVE IMPROVED OPERATING AND FINANCIAL RESULTS, ENHANCE CASELLA'S LONG-TERM PROSPECTS AND POSITION CASELLA TO CREATE VALUE FOR ITS STOCKHOLDERS
Over the past two and a half years, we have refocused our efforts and
simplified our business structure. In
We believe we have executed extremely well against this plan over the past two and a half years, as demonstrated in our improved financial performance.
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We have improved our performance and reduced exposure to risk by divesting or closing operations that did not fit within our core strategy and by focusing management's attention and Casella's capital resources on core operations to drive continued growth. Put plainly, by focusing on our core operations, we have significantly improved performance -- and we believe that our focused strategy provides a strong backbone for additional value creation.
Most recently, in
NEXT STEPS: CONTINUE TO IMPROVE FREE CASH FLOW, FURTHER REDUCING LEVERAGE
Early this summer, we refreshed our strategic plan since we had substantially completed the objectives we committed to in early 2013. Our newly launched plan focuses on further improving Free Cash Flow and reducing debt leverage through a focus in the following areas:
-
Increasing landfill returns by maximizing annual capacity utilization
in our
Western Region and driving pricing in excess of inflation in the disposal capacity constrained markets in ourEastern Region ; - Driving additional profitability of our collection operations through profitable revenue growth, operating efficiencies and selling or swapping under-performing routes or operations;
- Creating incremental value through our resource solutions offerings in our recycling, organics, and customer solutions operations; and
- Improving our balance sheet and reducing risk through continued capital discipline and a focus on debt repayment with excess cash flows.
OUR DECISIVE ACTIONS TO TRANSFORM CASELLA AND THE SUCCESS OF OUR STRATEGY ARE NOT GOING UNNOTICED
Our decisive actions to transform and reposition Casella, and our
improved financial and operating performance, which we believe is
attributable to our strategy, are not going unnoticed. In
As the stock chart below indicates, we have generated a significant increase in stockholder value since the beginning of the year which we believe is attributable to the success we have had in executing our strategy, strengthening our management team, reducing our risk, exiting non-core businesses and improving our financial and operating performance.
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CASELLA'S NOMINEES ARE HIGHLY QUALIFIED AND JOIN A REFRESHED BOARD OVERSEEING OUR EFFORTS TO DRIVE STOCKHOLDER VALUE
We believe that there are very real and stark differences between our
nominees,
Chairman & Chief Executive
Officer of
- Possesses close to 40 years of waste management industry experience and extensive operational and industry expertise relevant to our markets, most notably the regulatory, competitive and political sectors
- Understands the business and culture - has devoted his entire career to building Casella into one of the most respected regional waste management companies in the U.S.
- One of the two largest individual stockholders in Casella
- Led Casella's strategic repositioning and transformation over the last 2.5 years
JAMES E. O'CONNOR - Director since 2015
Retired Chairman & Chief
Executive Officer of Republic Services, Inc.
- Industry veteran who brings over 40 years of waste management industry experience
-
Former Chairman and CEO of Republic Services, Inc., the second largest
waste management company in
North America , which, during his tenure, grew from$1.4 billion in annual revenues to$8 billion in annual revenues, making it one of the largest waste management companies in the world - Previously spent close to 30 years at Waste Management, Inc. where he held various senior management positions
- Member of the Board of Directors of Clean Energy Fuels Corp. and the Canadian National Railway Company
Former President and
Chief Operating Officer of Progressive Waste Solutions Ltd.
- Industry veteran who brings over 40 years of waste management industry experience
-
Former President and COO of Progressive Waste Solutions Ltd., the
third largest waste management company in
North America -
Former EVP of North America Operations of
Waste Services, Inc. -
Over 20 years at Waste Management, Inc., the largest waste management
company in
North America , where he held various senior management positions, including EVP. During his tenure, Waste Management's annual revenue grew from approximately$1 billion to more than$6 billion - Previously served as a member of the Board of Directors of two publicly-traded waste management companies
Your Board believes that our newest independent directors and nominees, Messrs. Hulligan and O'Connor (both of whom have joined your Board within the past six months), are two of the most experienced, accomplished and admired individuals in the waste management industry and believe that both bring to your Board a proven record of success in leading and growing waste management businesses and creating stockholder value. We believe that their extensive senior management and governance experience at leading waste management companies and track record of driving growth and stockholder value creation will be extremely valuable to Casella as we continue to execute on our ongoing strategic initiatives to drive revenues and enhance profitability.
If Messrs. Casella, Hulligan and O'Connor are re-elected at the 2015 Annual Meeting, your Board would be composed of nine directors, all of whom we believe to be highly qualified directors dedicated to serving the best interests of all stockholders. Of these nine directors, seven would be independent and four would have joined your Board since 2008, bringing fresh perspectives and relevant business experience to your Board. Further, your Board would collectively possess a broad and diverse set of skills, experiences and insights in the areas of solid waste collection, recycling, disposal services, operations, accounting, finance, investment banking, mergers and acquisitions, capital markets, capital allocation, capital structure, risk management, and strategic planning.
The appointments of Messrs. Hulligan and O'Connor as new independent directors reflect your Board's continuing commitment to recruit new independent and highly qualified directors who have perspectives, experiences and competencies that expand the Board's scope and depth. Here is what third party analysts had to say about the appointments:
"The appointment of
-
"We believe the board appointments provide evidence of its
commitment to improving corporate governance and strengthening
management oversight."
-
JCP'S NOMINEES WOULD NOT BRING TO THE CASELLA BOARD ANY RELEVANT EXPERIENCE, SKILLS OR COMPETENCIES NOT ALREADY PRESENT AMONG CURRENT CASELLA BOARD MEMBERS
We question JCP's choice of nominees to replace two of your Board's most
highly qualified, experienced and valued directors -
-
JCP Nominee Brett W. Frazier - Mr.
Frazier has no public company board experience. His
board experience is limited to serving on the board of directors of
his local country club. Accordingly,
Mr. Frazier has no experience, as a public company board member, overseeing management, directly developing or implementing strategies to enhance long-term stockholder value or fulfilling the important fiduciary duties owed to stockholders by the directors of a public company. -
JCP Nominee James C. Pappas - Mr.
Pappas has no experience in the waste management industry,
either as an executive or as a member of a board of directors.
Furthermore, while
Mr. Pappas refers to his relatively short tenure of working less than three (3) years in investment banking as a "career with major investment banking firms," the facts are that Mr. Pappas was employed during that short period by two different firms, in each case as a junior-level investment banking analyst. In addition, Mr. Pappas' public company board experience has mostly been limited to food-related companies. As such, we do not believe that Mr. Pappas has any board or management experience, or even any substantial investment banking experience, that would provide him with the insights, experiences, skills and competencies, or industry knowledge, that are relevant to Casella's strategic priorities.
OUR BOARD HAS TAKEN CONCRETE ACTION TO ENHANCE ITS CORPORATE GOVERNANCE PRACTICES TO BE MORE CONSISTENT WITH BEST PRACTICES
As part of your Board's efforts to enhance its functionality and its ability to serve the long-term interests of stockholders, and in response to stockholder input, your Board has adopted the following corporate governance enhancements which it believes are consistent with best practices:
- a majority vote resignation policy for the election of directors in uncontested elections which requires that any incumbent nominee for your Board who does not receive more votes "for" his or her election than votes "withheld" for his or her election (with "abstentions" and "broker non-votes" not counted as a vote "for" or "withheld" from such nominee's election) to tender his or her resignation to your Board;
- stock ownership guidelines applicable to all executive officers (which supplements the stock ownership guidelines that were already in place for the members of your Board) that requires all executive officers to have a significant personal investment in Casella through their ownership of Casella shares;
- a compensation clawback policy applicable to all executive officers;
- a policy restricting any hedging and pledging activities by directors and executive officers with respect to Casella's securities, which is contained within Casella's insider trading policy;
-
an amendment to Casella's 2006 Stock Incentive Plan to provide that
your Board may not cancel in exchange for a cash payment any
outstanding option with an exercise price per share above the
then-current fair market value or take any other action under the Plan
that constitutes a "repricing" within the meaning of the rules of the
NASDAQ Stock Market ; and - a policy providing that any new employment agreements to be entered into by Casella will not contain any provisions providing for gross-up payments for excise taxes paid under Section 4999 of the Internal Revenue Code of 1986, as amended.
WE HAVE ATTEMPTED ON NUMEROUS OCCASIONS TO CONSTRUCTIVELY AND IN GOOD FAITH ENGAGE WITH JCP TO AVOID A PROXY CONTEST
Casella maintains an open dialogue with all its stockholders, and is
always open to constructive input. As such, over the past 6 months, we
have attempted on numerous occasions to constructively and in good faith
engage with JCP to hear its views on Casella. However, over the course
of numerous telephone discussions and even an in-person meeting with our
executive management at Casella's headquarters in
Despite our open dialogue with JCP and the good faith manner in which we
approached our discussions, the first time we heard any interest from
JCP in proposing director candidates was in
Your Board is very amenable to adding to its membership additional independent directors who would add to the depth and breadth of its insights, perspectives, competencies and skills and is receptive to considering and interviewing candidates referred to us by a stockholder but such candidates must be committed to acting in the best interests of ALL stockholders and must not be, in any way, obligated or expected to serve or advocate for the interests of any particular constituency. We question how serious JCP was about having its proposed candidates serve as directors who would represent the best interests of ALL stockholders when it would not even allow them to meet with us in person or complete our standard director questionnaire.
JCP LACKS ANY SPECIFIC PLANS ON HOW TO ENHANCE STOCKHOLDER VALUE AT CASELLA
To date, JCP has failed to put forward any ideas to further enhance
Casella's strong performance or enhance Casella's long-term prospects.
In fact, in its most recent amended proxy filing with the
"The [JCP] Nominees do not have specific plans for the Company…"
In addition, Mr. Pappas' lack of any waste management industry experience whatsoever, the fact that Mr. Pappas' public company board experience is mostly limited to food-related companies, and Mr. Frazier's lack of experience ever serving on a public company's board of directors calls in to question how they would better serve the interests of stockholders if they were elected to your Board to replace two of our most experienced and valued directors, both of whom have extensive experience in the waste management industry and both of whom have experience serving on one or more public company boards.
The point is quite simple - despite their claimed "displeasure with our performance," JCP fails to acknowledge the progress we have achieved in the past two and a half years and the momentum we believe we have going forward, and has yet to put forward any sort of credible plan of its own.
Unlike JCP and its nominees, we have a plan - a plan that we believe is working and that we believe will continue to drive positive results and strong momentum.
SUPPORT YOUR BOARD'S HIGHLY QUALIFIED NOMINEES BY VOTING THE WHITE PROXY CARD TODAY
The upcoming Annual Meeting is a significant event that could determine the future of Casella. Your vote is important - no matter how many shares you own - as no stockholder is too small.
Whether or not you plan to attend the Annual Meeting, we urge you to
sign, date and return the enclosed WHITE
proxy card in the postage-paid envelope provided and vote FOR
ALL your Board's highly qualified and very experienced
nominees -
We also urge you to discard any proxy card or voting instruction form you may receive from JCP. Even a WITHHOLD vote with respect to JCP's nominees on its proxy card will cancel any proxy previously given to Casella. If you previously signed a proxy card sent to you by JCP, you can revoke that proxy card and vote for your Board's recommended nominees by voting a new WHITE proxy card. Only your latest-dated proxy card will count. Your Board encourages you to vote each WHITE proxy card you receive.
On behalf of your Board of Directors, we thank you for your continued support of the Company. We look forward to communicating further with you in the coming weeks.
Sincerely,
Chairman & CEO
Lead Independent Director
If you have any questions, require additional copies of Casella's proxy materials or need assistance in voting your WHITE proxy card, please contact our proxy solicitor at the phone numbers or email listed below:
(212) 929-5500
(Call Collect) or Call Toll-Free (800) 322-2885
Email: proxy@mackenziepartners.com
Forward-Looking Statements
Certain matters discussed in this letter are "forward-looking
statements" intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such by
the context of the statements, including words such as "believe,"
"expect," "anticipate," "plan," "may," "would," "intend," "estimate,"
"guidance" and other similar expressions, whether in the negative or
affirmative. Similarly, statements that describe the objectives, plans
or goals of Casella are forward-looking. Such forward-looking statements
include, but are not limited to, statements regarding the anticipated
proxy contest by
Important Information And Where To Find It
Casella, its directors and certain of its executive officers are deemed
to be participants in the solicitation of proxies from Casella's
stockholders in connection with the matters to be considered at
Casella's 2015 Annual Meeting of Stockholders. On
Disclaimer
Casella has neither sought nor obtained the consent from any third party to use any statements or information contained in this letter that have been obtained or derived from statements made or published by such third parties. Any such statements or information should not be viewed as indicating the support of such third parties for the views expressed herein.
Non-GAAP Financial Measure
As noted above, in addition to disclosing financial results prepared in
accordance with Generally Accepted Accounting Principles in
Non-GAAP financial measures are not in accordance with or an alternative for GAAP. Adjusted EBITDA should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP, and may be different from Adjusted EBITDA presented by other companies.
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Casella is being advised in connection with the proxy contest by
About
Forward-Looking Statements
Certain matters discussed in this press release are "forward-looking
statements" intended to qualify for the safe harbors from liability
established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such by
the context of the statements, including words such as "believe,"
"expect," "anticipate," "plan," "may," "would," "intend," "estimate,"
"guidance" and other similar expressions, whether in the negative or
affirmative. Similarly, statements that describe the objectives, plans
or goals of Casella are forward-looking. Such forward-looking statements
include, but are not limited to, statements regarding the anticipated
proxy contest by
Important Additional Information And Where To Find It
Casella, its directors and certain of its executive officers are deemed
to be participants in the solicitation of proxies from Casella's
stockholders in connection with the matters to be considered at
Casella's 2015 Annual Meeting of Stockholders. On
1 Calendar Year 2015 Guidance as updated/reaffirmed on 7/29/15.
2 Casella presents Adjusted EBITDA, a non-GAAP measure,
because it considers it an important supplemental measure of its
performance and believes it is frequently used by securities analysts,
investors and other interested parties in the evaluation of Casella's
results. Management uses Adjusted EBITDA to further understand Casella's
"core operating performance." Casella believes its "core operating
performance" is helpful in understanding its ongoing performance in the
ordinary course of operations. Casella believes that providing Adjusted
EBITDA to investors, in addition to the corresponding income statement
measures, affords investors the benefit of viewing its performance using
the same financial metrics that the management team uses in making many
key decisions and understanding how the core business and its results of
operations has performed. Casella further believes that providing this
information allows its investors greater transparency and a better
understanding of its core financial performance. In addition, the
instruments governing Casella's indebtedness use EBITDA (with additional
adjustments) to measure its compliance with covenants. Please refer to
the appendix for further information on our use of non-GAAP measures,
including a reconciliation of Adjusted EBITDA to net income (loss). Net
income (loss) for the periods presented above was (
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