September 8, 2014
Richard Burke took over as CEO of Ponte Vedra, Fla.–based Advanced Disposal Services Inc. in July—having previously served as president—following the retirement of Charlie Appleby from the company. He joined Advanced Disposal when it bought the United States solid waste operations of Veolia Environmental Services North America Corp., where he was president and CEO. He has worked for 27 years in the solid waste and recycling industry.
A few weeks into his new role running Advanced Disposal, Burke speaks with Waste360 in an exclusive interview to talk about his vision for the future of the company and the industry.
Waste360: Advanced Disposal had tremendous growth under Charlie Appleby’s direction. As the new CEO, what are your overall priorities and vision for the company?
Burke: We will continue to grow. We’ll continue to be focused on tuck-in acquisitions and municipal contracts and privatization efforts. And we’ll enhance our organic sales. We’re spending a lot of time in training our outside sales people, both on new growth and retention.
In addition to the growth side of the house, we’re keenly focused on improving the efficiencies within the business. When you put three companies together, with that comes opportunities and challenges. One of our challenges now is to drive out some costs, to get some redundancy out of the business. So we’re working on that.
Efficiencies also come from better routing, centralized purchasing. And we’ve committed to increasing our automated residential collection. We’re currently at 46 percent of our residential fleet automated. We have plans to get that to 50 percent by the end of Q2 ‘15.
On CNG (compressed natural gas), when we first put the three companies together we were only at about 3 percent of our total fleet on CNG. We’re now at 7 percent of our total fleet on CNG, and it’ll be at 11 by the end of the year, with plans to take that to 16 percent by the end of ‘15. Not only is there a cost savings to CNG, but it’s also environmentally the right thing to do.
Those are some of the priorities. Probably from a culture standpoint what we’ve really been focused on is to try to ingrain the Service First, Safety Always culture that I talk about, so that it permeates across our 5,400 people. I think those are four simple words that we can rally our teams around. That we are in a business about delivering service, delivering the highest quality service possible in our industry. But realizing that nothing we do is more important than the safety of our people on the streets. We really want to build the culture around Service First, Safety Always, and I think we’ve taken some nice strides that way.
Waste360: You joined Advanced Disposal after running Veolia. How has the integration of Veolia and Interstate Waste Services gone, has it been what you expected, and what organizational and cultural differences have you seen with the two firms?
Burke: We’ve come together very well as a company since putting these three together. There were a lot of similarities in the culture, especially between Veolia and Advanced. I think both of those had a strategy of building our companies around vertically integrated geographic hubs, with more times than not the disposal or treatment being the hub and [routes emanating from there]. So we weren’t that different from the operating standpoint.
What we’ve really tried to do is foster the “no conquering hero” mentality, where no one bought the other one. We’ve tried to pull the best practices out of all three companies to make this new Service First, Safety Always culture. I think we’ve done a nice job; our teams have really pulled together well in order to function as Advanced Disposal. I’ve asked everybody to stop referring to the legacy companies, that we are all Advanced Disposal. And that will take time, but it’s coming. I think people have embraced the change and they’re enjoying the new company.
What’s different, and one of the cultural differences that I did see with Advanced Disposal, was the decisiveness that Charlie and his team showed with the business. They gathered data; they made quick decisions and good decisions. They were able to react quickly to market changes. We’re doing our best to pull that culture across a much larger platform now, but not lose this fair, consistent, decisive way to do business.
So we continue to favor local entrepreneurship. We still believe that the best way to run these companies is with corporate standards, corporate set strategy, but really local execution and local business. Local people doing business with local companies on a relationship basis. We still believe that is very important in our industry. We favor local entrepreneurship over corporate bureaucracy.
Waste360: What will Advanced Disposal’s approach and pace be with regard to acquisitions?
Burke: Acquisitions, they’ve been a key part of our growth ever since the company’s inception. We’ll continue to look for opportunities to grow strategically in key markets and enhance our vertically integrated geographic hub strategy. Acquisitions are lumpy. They are opportunistic. We’re ready to seize opportunities when they become available, and we’re out looking for deals all the time to enhance our positions.
So we’ll continue to do acquisitions. Between acquisitions and municipal contracts, we’ve targeted somewhere around $30 million to $50 million a year for growth for the company for ‘14 and ‘15.
Waste360: Has that been one area you’ve seen as different from Veolia, that the tempo of spending opportunities was more restrained with Veolia than with Advanced?
Burke: Absolutely. Veolia was a very large French utility. So it was competing against water projects, and transportation and energy projects, all for a set amount of capital.
Here we don’t have those constraints. If it’s good business and it fits with our model and our strategy, we really don’t have anything holding us back from doing deals.
Waste360: What will be the company’s geographic strategy?
Burke: We currently operate across 17 states and the Bahamas. We’re more focused on growing the company on our vertically integrated geographic hubs than we are geography. Having said that, we believe we have plenty of growth opportunities in the 17 states and across our platform. The fact is that in many former Veolia markets, we have built relationships with tuck-in acquisitions that we could do but didn’t have the capital to execute. So now that we have the capital, you’re seeing more of those come our way. We believe for the foreseeable future, we have nice growth opportunities in our existing footprint.
Now, it’s more important to us that we follow our strategy of vertically integrated hubs than it is we get stuck with: We would never go to Texas, or we would never go to Kansas, or wherever the opportunity is. If the model fits, we’re not going to let geography get in the way of doing a deal.
Waste360: As far as major acquisitions, one company that has been identified as a possible fit with Advanced Disposal is Deffenbaugh. What are your thoughts about that possibility?
Burke: It wouldn’t really be fair for me to comment on a specific opportunity like that. Vertically integrated geographic hubs are what we’re looking for, and that certainly is one. What I would say is that all acquisitions ultimately come down to valuation. It comes down to paying a fair price for an acquisition. We haven’t been and we won’t be in the habit of overpaying for any acquisition just because it fits our model.
Waste360: How do you view the prospect of Advanced Disposal going public at some point?
Burke: That’s really a decision for our board and not so much for the management team, even though we do sit on the board as well. Our role in all that is to focus on value creation. How can we make the company as solid and as profitable as it can be? And something will certainly take place. We’re owned by equity, so at some point they’ll want to exit the investment. But right now the management team is focused on value creation; those guys will decide whether we stay private a long time or go public.
Waste360: What do you see as the main advantages and disadvantages of going public from an operational viewpoint?
Burke: Going public would give us access to capital, to less expensive capital with which to continue to fulfill our vision and grow our company. That’s certainly the most attractive side.
Waste360: Any hurdles that you see from an operational viewpoint?
Burke: We’ll be [Sarbanes-Oxley] compliant by the end of this year, so we’re certainly working on projects within the company so that when our board decides it’s time, we’ll be ready. Becoming SOX compliant is certainly a hurdle for anybody that’s been down the path. But we’re well on our way, and we plan to be completed by December.
Other than that, I don’t see any obvious hurdles that we have to overcome other than continuing to focus on day-to-day, and creating value in the company.
Waste360: Advanced Disposal recently reached its largest-ever privatization agreement with Detroit. What challenges does that present, particularly with Detroit’s financial troubles, and how big will privatization targets be as a major part of the company’s strategy?
Burke: We’re currently servicing about 125,000 homes in Detroit, and we brought in 58 new CNG-powered vehicles to do that. The startup has gone really well. Our local team has executed brilliantly, and they’re exceeding the expectations of the customer. And they’re delivering our commitment to quality service in a Service First, Safety Always manner.
We’ve brought in a number of employees from the city of Detroit to be our drivers and operators, and they’re doing a great job. I think they enjoy the private sector over what they’ve been through in the public sector. I’ve been up a few times myself and met with them, and they’re all smiles. Shiny new trucks and doing a great job.
As far as getting paid, we feel very comfortable that the terms and conditions we laid out in our contract make sure that we’ll be paid on a timely basis, and up to this point Detroit’s lived up to everything that we committed to in the contract.
As far as privatization goes going forward, yes, it’s a huge part of our growth. It’s a longer sales cycle, of course. Hopefully it doesn’t take a city’s bankruptcy in order to drive one of those. We plan to use Detroit as a reference to go to other cities, to try to market this and say, look what were able to do, and how that not only saved Detroit money but increased the quality of service to its citizens.
Waste360: The privatization trend historically has been one of gradual growth. Do you see that pace continuing or do you expect an uptick?
Burke: I think it will accelerate more than it has in the past. And I think it will be as cities are grappling with underfunded pensions and other things that are facing cities. At the end of the day, the private sector—Advanced Disposal and our other competitors—we’re certainly more than capable of taking the service over and providing the citizens of any city with a fantastic service offering. We’re not prepared to be their policemen or their firemen or their schoolteachers. As cities look to where they get the best return on their investment of tax dollars, I think services like waste collection and recycling will become privatized.
Waste360: There’s been a lot of discussion among haulers —starting with Waste Management CEO David Steiner—that recycling is currently an economic challenge and things need to change. What is your feeling about the business?
Burke: Customers, both residential and commercial, want to recycle. And we certainly want to be their service provider of choice. We service more than a million homes curbside and tens of thousands of commercial customers every year.
Having said that, I do believe that the economics of recycling have become misconstrued within our industry. Advanced has historically treated recycling, collection and processing almost as a loss leader to gain the more profitable MSW (municipal solid waste) collection services. But I don’t believe that is a sustainable model. I think we have to charge the customer a fair price for collection and processing, and then be willing to share the commodity value back with the customer. I don’t believe that investment capital with most of the return tied to volatile commodity pricing is a good model for our industry.
So at Advanced Disposal, we’ve taken on a project here internally to review all of our recycling contracts and customers and take a hard look at what can be done to come up with an equitable and fair approach to recycling going forward. That doesn’t mean we’re going to go out and change contracts with existing customers, but it does mean that moving forward, we’re going to take a little deeper look at the proper return on invested capital for those dollars.
Waste360: Are customers starting to become more understanding about those concerns?
Burke: I think it’s hard to generalize. Some we’re dealing with completely understand it. Others have no motivating reason to understand it. But they’ll come along; it will take time.
Waste360: What did you learn from your predecessor, Charlie Appleby, and do you see your personal management style as differing from his?
Burke: Charlie’s a good leader. He’s also somebody I consider to be a mentor and a friend. I feel very fortunate that he agreed to stay on our board. He and I continue to discuss. He’s a great sounding board for me to discuss ideas.
I think our leadership styles are more similar than they’re different. We both like to lead from out front. We both like to engage in the business. We both love the industry. And you can see it not only with [how we manage] our own company but also in how we give back to the National Waste & Recycling Association, or, in my case, serving as chairman of EREF [Environmental Research and Education Foundation].
Our differences probably come more from our background. Charlie by education is a tax CPA [certified public accountant]. By background I’m a garbage man. I’ve spent most of my life in this business. And I’ve held numerous roles within the industry. I think I have a great awareness of the challenges that our local operating teams deal with every day. And I think that gives me a little different perspective as to how I’ll lead the company.
I’ve had three guiding principles throughout my career that I’ve tried to stick to. I’m sure Charlie does too; I’m just not sure what his are. But mine are: fair, consistent, decisive. As long as we can lead the company in a way that’s fair, consistent and decisive, I think people tend to enjoy working in that type of culture.
Waste360: Where do you think the industry is heading, and what do you think its main challenges are?
Burke: Even though we talked about the economics of it needing some work, I think you’ll see recycling continuing to grow. I think single-stream programs will increase volumes. I think you’ll see more programs coming on in municipalities that don’t have programs, as regulations increase and as economies improve and they free up dollars. So on the curbside side, I see more volume. With single-stream, I believe the industry has tried to increase volume, making it easier for the consumer to recycle. It’ll also put challenges on us, because with increased volumes in single-stream, we’re dealing with a lot more contamination now than we ever did with the smaller containers pre-sorted at the curb. So the challenge for us is going to be how to collect that, how to market that and how to keep the contamination out.
On the treatment side, I believe in most markets, landfills are going to be the desired treatment method for waste. But I believe they’ll change. Increased regulations on leachate and gas will [effect] the engineering side of the house, we’re going to have to get better at it. We’re pretty good at it now, but I think we’re going to have to figure out a way to minimize leachate, because the treatment of leachate is becoming more and more difficult, with discharge restrictions. So we’re going to have to figure out how to minimize leachate.
I think our gas recovery is going to have to get better. Right now we might be in that 70-75 percent range in the amount of gas we’re actually getting out of the hill. How do we get all the gas, or at least something close to all? And then be able to turn that gas into a renewable energy source. I think many of us are working on that. I think that will continue to evolve, that we get more proficient at the sites.
I also expect that there will be some pretreatment on the front end of landfills over time, where certain high-fiber or high-value loads will be presorted before those loads actually go into the landfill, where we can try to get a second life or another use out of the material that’s being discarded. Where we can take wood out and turn it into fuel, or we can take rubble out and turn it into a road base. Things like that.
I love the industry, I love the business. You would think that garbage shouldn’t be this much fun, but it is. Every day is different and there’s always a new challenge. But with a new challenge comes a new opportunity. So bring on the challenges.
Waste360: Anything else you’d like to add?
Burke: I love the industry. I think this is a unique opportunity for myself and our team to take Advanced Disposal and create a great foundation, to create the premier environmental services company in our industry. Our strategy is fairly simple: vertically integrated geographic hubs coupled with a management style that says corporate doesn’t have all the answers. That corporate sets standards—I call them guardrails—but we allow the local operating managers to operate within the guardrails. That we don’t prescribe everything to them. That we expect them to be fair, consistent and decisive themselves. And their local market—we think that by creating that culture, that people will thrive, and that they will enjoy being something of a local entrepreneur within corporate guardrails.
And through that, it’s our hope that we’re able to attract the best talent, that we’re able to provide a high level of service, and that we’re able to actually put the Service First, Safety Always culture into action where people can actually see what that looks like, as opposed to just four words on a sign.