Clean Harbors Announces Third-Quarter 2019 Financial Results

• Increases Q3 Revenues 6% to $891.7 Million
• Reports Net Income of $36.4 Million, or $0.65 per Diluted Share; Adjusted EPS of $0.72
• Achieves 11% Increase in Q3 Adjusted EBITDA to $156.6 Million on Strength in Incineration and Environmental Services
• Improves Adjusted EBITDA Margin by 80 Basis Points to 17.6%
• Increases Midpoint of 2019 Adjusted EBITDA Guidance Range to $540 Million; Reiterates Adjusted Free Cash Flow Guidance of $200 Million to $220 Million

NORWELL, Mass.--(BUSINESS WIRE)--Oct. 30, 2019-- Clean Harbors, Inc. (“Clean Harbors”) (NYSE: CLH), the leading provider of environmental, energy and industrial services throughout North America, today announced financial results for the third quarter ended September 30, 2019.

“We generated strong results in the third quarter, as we drove high-value waste streams into our network and achieved growth across our environmental businesses,” said Alan S. McKim, Chairman, President and Chief Executive Officer. “We extended our 2019 momentum with a top-line increase of 6% and corresponding growth in Adjusted EBITDA of 11%. As a result, our Adjusted EBITDA margin grew year-over-year by 80 basis points to 17.6%.”

Third-quarter revenues increased to $891.7 million from $843.2 million in the same period of 2018. Income from operations grew 22% to $80.4 million from $65.7 million in the year-earlier quarter.

Net income for the third quarter of 2019 was $36.4 million, or $0.65 per diluted share. This compares with net income for the same period in 2018 of $31.1 million, or $0.55 per diluted share. Adjusted for certain items in both periods, adjusted net income was $40.7 million, or $0.72 per diluted share, for the third quarter of 2019 compared with adjusted net income of $33.3 million, or $0.59 per diluted share, in the same period of 2018. (See reconciliation table below)

Adjusted EBITDA (see description below) in the third quarter of 2019 increased 11% to $156.6 million from $141.3 million in the same period of 2018.

“In our Environmental Services segment, we achieved a healthy revenue increase of 8% with significant Adjusted EBITDA growth of 19% as we capitalized on the leverage in our network to deliver a 180-basis-point margin improvement from a year ago,” McKim said. “Incineration utilization climbed to 92% from 84% a year ago, as we saw a consistent flow of volumes throughout the quarter and our facilities ran efficiently. In addition, our average price per pound rose approximately 12% year-over-year due to our ability to capture a range of higher-margin waste. At the same time, our landfill volumes increased 6% from the prior year as steady base business was supported by project wins. We also benefitted from strong contributions from our Field Services team this quarter, which included $8 million of large-scale emergency response projects.

“Within our Safety-Kleen segment, revenue increased 2% as growth in our core branch offerings and pricing initiatives offset slower-than-expected blended product sales in Safety-Kleen Oil,” McKim said. “Profitability was a similar story, with 2% growth in Adjusted EBITDA and margins increasing 20 basis points from the third quarter of 2018. Waste oil collection remained strong at 63 million gallons, with a charge-for-oil rate that was slightly improved from last year’s third quarter. This helped to partly offset a lower year-over-year price in base oil. Given the current volatility in the marketplace with IMO 2020 on the horizon, we continue to target markets where we can gather more waste oil at the best price.”

Business Outlook and Financial Guidance

“We anticipate capping 2019 with a strong performance and achieving profitable growth in the fourth quarter,” McKim said. “While we have seen small pockets of industry-specific weakness, the overall outlook for our markets remains positive. Within Environmental Services, we continue to have a healthy backlog of waste in our disposal network. We anticipate a strong finish to the year through a combination of base business and projects. Our businesses that provide industrial, field and energy-related services enter the final quarter with momentum as well.

“Safety-Kleen’s branch business continues to perform well with growth across its core offerings,” McKim said. “At the same time, Safety-Kleen Oil continues to effectively manage the spread in our re-refinery business while our plants should generate record production this year. We are seeking opportunities to capitalize on the potential positive impact of IMO 2020 in the coming quarters.

“Given our current market outlook, we expect Adjusted EBITDA in the fourth quarter to grow in the mid- to high-single digit range compared with a year ago. We remain on track to deliver a record level of annual Adjusted EBITDA and adjusted free cash flow in 2019,” McKim concluded.

Based on its year-to-date financial performance and current market conditions, Clean Harbors raised the lower end of its Adjusted EBITDA guidance by $10 million, and now expects full-year 2019 Adjusted EBITDA in the range of $530 million to $550 million. On a GAAP basis, the Company’s guidance is based on anticipated 2019 net income in the range of $85 million to $105 million. Clean Harbors also continues to expect its adjusted free cash flow in the range of $200 million to $220 million, which is based on anticipated 2019 net cash from operating activities in the range of $390 million to $430 million.

Non-GAAP Results

Clean Harbors reports Adjusted EBITDA, which is a non-GAAP financial measure and should not be considered an alternative to net income or other measurements under generally accepted accounting principles (GAAP), but viewed only as a supplement to those measurements. Adjusted EBITDA is not calculated identically by all companies, and therefore the Company’s measurement of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. Clean Harbors believes that Adjusted EBITDA provides additional useful information to investors since the Company’s loan covenants are based upon levels of Adjusted EBITDA achieved and management routinely evaluates the performance of its businesses based upon levels of Adjusted EBITDA. The Company defines Adjusted EBITDA in accordance with its existing revolving credit agreement, as described in the following reconciliation showing the differences between reported net income and Adjusted EBITDA for the three and nine months ended September 30, 2019 and 2018 (in thousands):

		For the Three Months Ended:					For the Nine Months Ended:
		September 30, 2019		September 30, 2018			September 30, 2019		September 30, 2018
Net income		$36,369		$31,089			$73,589		$49,205
Accretion of environmental liabilities		2,490		2,450			7,624		7,328
Depreciation and amortization		73,756		73,082			223,328		220,686
Other expense (income), net		427		996			(1,992)		449
Loss on early extinguishment of debt		6,119		2,469			6,119		2,469
Interest expense, net		19,702		19,916			59,681		60,955
Provision for income taxes		17,750		11,275			39,752		28,011
Adjusted EBITDA		$156,613		$141,277			$408,101		$369,103
Adjusted EBITDA Margin		17.6%		16.8%			16.1%		15.1%

This press release includes a discussion of net income and earnings per share adjusted for the loss on early extinguishment of debt and the impacts of tax-related valuation allowances as identified in the reconciliations provided below. The Company believes that discussion of these additional non-GAAP measures provides investors with meaningful comparisons of current results to prior periods’ results by excluding items that the Company does not believe reflect its fundamental business performance. The following shows the difference between net income to adjusted net income, and earnings per share to adjusted earnings per share for the three and nine months ended September 30, 2019 and 2018 (in thousands, except per share amounts):

			For the Three Months Ended:					For the Nine Months Ended:
			September 30, 2019		September 30, 2018			September 30, 2019		September 30, 2018
Adjusted net income
Net income			$36,369		$31,089			$73,589		$49,205
Loss on early extinguishment of debt, net of tax			4,284		1,735			4,284		1,735
Tax-related valuation allowances and other			-		492			4,762		6,593
Adjusted net income			$40,653		$33,316			$82,635		$57,533
Adjusted earnings per share
Earnings per share			$0.65		$0.55			$1.31		$0.87
Loss on early extinguishment of debt, net of tax			0.07		0.03			0.08		0.03
Tax-related valuation allowances and other			-		0.01			0.08		0.12
Adjusted earnings per share			$0.72		$0.59			$1.47		$1.02

Adjusted Free Cash Flow Reconciliation

Clean Harbors reports adjusted free cash flow, which it considers to be a measurement of liquidity that provides useful information to investors about its ability to generate cash. The Company defines adjusted free cash flow as net cash from operating activities excluding cash impacts of items derived from non-operating activities, such as taxes paid in connection with divestitures, less additions to property, plant and equipment plus proceeds from sale and disposal of fixed assets. Adjusted free cash flow should not be considered an alternative to net cash from operating activities or other measurements under GAAP. Adjusted free cash flow is not calculated identically by all companies, and therefore our measurement of adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.

An itemized reconciliation between net cash from operating activities and adjusted free cash flow is as follows (in thousands):

	For the Three Months Ended:							For the Nine Months Ended:
	September 30, 2019		September 30, 2018					September 30, 2019		September 30, 2018
Adjusted free cash flow
Net cash from operating activities	$146,205		$117,545					$284,675		$247,215
Additions to property, plant and equipment	(56,161)		(56,583)					(174,533)		(150,722)
Proceeds from sale and disposal of fixed assets	1,559		3,470					8,948		6,111
Adjusted free cash flow	$91,603		$64,432					$119,090		$102,604

Adjusted EBITDA Guidance Reconciliation

An itemized reconciliation between projected net income and projected Adjusted EBITDA is as follows (in millions):

			For the Year Ending December 31, 2019
Projected GAAP net income			$85		to		$105
Adjustments:
Accretion of environmental liabilities			10		to		10
Depreciation and amortization			300		to		295
Loss on early extinguishment of debt			6		to		6
Interest expense, net			80		to		79
Provision for income taxes			49		to		55
Projected Adjusted EBITDA			$530		to		$550

Adjusted Free Cash Flow Guidance Reconciliation

An itemized reconciliation between projected net cash from operating activities and projected adjusted free cash flow is as follows (in millions):

			For the Year Ending December 31, 2019
Projected net cash from operating activities			$390		to		$430
Additions to property, plant and equipment			(200)		to		(220)
Proceeds from sale and disposal of fixed assets			10		to		10
Projected adjusted free cash flow			$200		to		$220

Conference Call Information

Clean Harbors will conduct a conference call for investors today at 9:00 a.m. (ET) to discuss the information contained in this press release. During the call, management will discuss Clean Harbors’ financial results, business outlook and growth strategy. Investors who wish to listen to the webcast and view the accompanying slides should visit the Investor Relations section of the Company’s website at www.cleanharbors.com. The live call also can be accessed by dialing 201.689.8881 or 877.709.8155 prior to the start time. If you are unable to listen to the live conference call, the webcast will be archived on the Company’s website.

About Clean Harbors

Clean Harbors (NYSE: CLH) is North America’s leading provider of environmental, energy and industrial services. The Company serves a diverse customer base, including a majority of Fortune 500 companies. Its customer base spans a number of industries, including chemical, energy and manufacturing, as well as numerous government agencies. These customers rely on Clean Harbors to deliver a broad range of services such as end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services. Through its Safety-Kleen subsidiary, Clean Harbors also is North America’s largest re-refiner and recycler of used oil and a leading provider of parts washers and environmental services to commercial, industrial and automotive customers. Founded in 1980 and based in Massachusetts, Clean Harbors operates throughout the United States, Canada, Mexico and Puerto Rico. For more information, visit www.cleanharbors.com.

Safe Harbor Statement

Any statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” “may,” “likely,” or similar expressions. Such statements may include, but are not limited to, statements about future financial and operating results, and other statements that are not historical facts. Such statements are based upon the beliefs and expectations of Clean Harbors’ management as of this date only and are subject to certain risks and uncertainties that could cause actual results to differ materially including, without limitation, those items identified as “Risk Factors” in Clean Harbors’ most recently filed Form 10-K and Form 10-Q. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. Clean Harbors undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements other than through its filings with the Securities and Exchange Commission, which may be viewed in the “Investors” section of Clean Harbors’ website at www.cleanharbors.com.

CLEAN HARBORS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
		For the Three Months Ended:					For the Nine Months Ended:
		September 30, 2019		September 30, 2018			September 30, 2019		September 30, 2018
Revenues		$891,668		$843,181			$2,541,185		$2,442,099
Cost of revenues (exclusive of items shown separately below)		612,754		580,685			1,772,051		1,710,694
Selling, general and administrative expenses		122,301		121,219			361,033		362,302
Accretion of environmental liabilities		2,490		2,450			7,624		7,328
Depreciation and amortization		73,756		73,082			223,328		220,686
Income from operations		80,367		65,745			177,149		141,089
Other (expense) income, net		(427)		(996)			1,992		(449)
Loss on early extinguishment of debt		(6,119)		(2,469)			(6,119)		(2,469)
Interest expense, net		(19,702)		(19,916)			(59,681)		(60,955)
Income before provision for income taxes		54,119		42,364			113,341		77,216
Provision for income taxes		17,750		11,275			39,752		28,011
Net income		$36,369		$31,089			$73,589		$49,205
Earnings per share:
Basic		$0.65		$0.55			$1.32		$0.88
Diluted		$0.65		$0.55			$1.31		$0.87
Shares used to compute earnings per share — Basic		55,850		56,059			55,858		56,222
Shares used to compute earnings per share — Diluted		56,165		56,291			56,109		56,360

CLEAN HARBORS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
		September 30, 2019			December 31, 2018
Current assets:
Cash and cash equivalents		$282,233			$226,507
Short-term marketable securities		46,877			52,856
Accounts receivable, net		641,667			606,952
Unbilled accounts receivable		58,842			54,794
Deferred costs		21,939			18,770
Inventories and supplies		210,827			199,479
Prepaid expenses and other current assets		38,199			42,800
Total current assets		1,300,584			1,202,158
Property, plant and equipment, net		1,593,993			1,561,978
Other assets:
Operating lease right-of-use assets		164,302			—
Goodwill		524,581			514,189
Permits and other intangibles, net		425,863			441,875
Other		12,539			18,121
Total other assets		1,127,285			974,185
Total assets		$4,021,862			$3,738,321
Current liabilities:
Current portion of long-term obligations		$7,535			$7,535
Accounts payable		277,545			276,461
Deferred revenue		73,157			61,843
Accrued expenses		253,455			233,405
Current portion of closure, post-closure and remedial liabilities		26,986			23,034
Current portion of operating lease liabilities		41,364			—
Total current liabilities		680,042			602,278
Other liabilities:
Closure and post-closure liabilities, less current portion		64,263			60,339
Remedial liabilities, less current portion		100,179			107,575
Long-term obligations, less current portion		1,555,257			1,565,021
Operating lease liabilities, less current portion		122,668			—
Deferred taxes, unrecognized tax benefits and other long-term liabilities		263,658			233,352
Total other liabilities		2,106,025			1,966,287
Total stockholders’ equity, net		1,235,795			1,169,756
Total liabilities and stockholders’ equity		$4,021,862			$3,738,321

CLEAN HARBORS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
		For the Nine Months Ended:
		September 30, 2019			September 30, 2018
Cash flows from operating activities:
Net income			$73,589				$49,205
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		223,328				220,686
Allowance for doubtful accounts		(745)				6,869
Amortization of deferred financing costs and debt discount		2,908				2,841
Accretion of environmental liabilities		7,624				7,328
Changes in environmental liability estimates		(585)				(301)
Deferred income taxes		(973)				61
Other (income) expense, net		(1,992)				449
Stock-based compensation		14,664				10,726
Loss on early extinguishment of debt		6,119				2,469
Environmental expenditures		(12,804)				(7,238)
Changes in assets and liabilities, net of acquisitions
Accounts receivable and unbilled accounts receivable		(31,408)				(76,249)
Inventories and supplies		(11,982)				(20,534)
Other current and non-current assets		(5,425)				(523)
Accounts payable		3,035				22,041
Other current and long-term liabilities		19,322				29,385
Net cash from operating activities		284,675				247,215
Cash flows used in investing activities:
Additions to property, plant and equipment		(174,533)				(150,722)
Proceeds from sale and disposal of fixed assets		8,948				6,111
Acquisitions, net of cash acquired		(29,479)				(151,023)
Additions to intangible assets including costs to obtain or renew permits		(2,896)				(3,500)
Proceeds from sale of available-for-sale securities		41,612				20,123
Purchases of available-for-sale securities		(30,761)				(20,471)
Net cash used in investing activities		(187,109)				(299,482)
Cash flows used in financing activities:
Change in uncashed checks		(3,516)				(3,476)
Tax payments related to withholdings on vested restricted stock		(5,505)				(2,566)
Repurchases of common stock		(16,390)				(33,581)
Deferred financing costs paid		(10,053)				(3,938)
Premiums paid on early extinguishment of debt		(2,689)				(1,219)
Payments on finance lease		(327)				—
Principal payments on debt		(850,652)				(403,884)
Issuance of unsecured senior notes		845,000				—
Issuance of secured senior notes, net of discount		—				348,250
Borrowing from revolving credit facility		—				50,000
Net cash used in financing activities		(44,132)				(50,414)
Effect of exchange rate change on cash		2,292				(1,221)
Increase (decrease) in cash and cash equivalents		55,726				(103,902)
Cash and cash equivalents, beginning of period			226,507				319,399
Cash and cash equivalents, end of period			$282,233				$215,497

Supplemental information:
Cash payments for interest and income taxes:
Interest paid			$52,440			$58,312
Income taxes paid			23,797			16,071
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			42,105			—
Operating cash flows from finance lease			979			—
Financing cash flows from finance lease			327			—
Non-cash investing activities:
Property, plant and equipment accrued			14,875			13,834
ROU assets obtained in exchange for new operating lease liabilities			8,008			—
ROU asset obtained in exchange for new finance lease liabilities			31,011			—

Supplemental Segment Data (in thousands)
		For the Three Months Ended:
Revenue		September 30, 2019														September 30, 2018
		Third Party Revenues			Intersegment Revenues (Expense), net							Direct Revenues				Third Party Revenues			Intersegment Revenues (Expense), net								Direct Revenues
Environmental Services		$550,122			$36,750							$586,872				$508,813			$34,167								$542,980
Safety-Kleen		341,417			(35,272)							306,145				333,901			(33,016)								300,885
Corporate Items		129			(1,478)							(1,349)				467			(1,151)								(684)
Total		$891,668			$—							$891,668				$843,181			$—								$843,181
		For the Nine Months Ended:
Revenue		September 30, 2019														September 30, 2018
		Third Party Revenues			Intersegment Revenues (Expense), net					Direct Revenues						Third Party Revenues				Intersegment Revenues (Expense), net					Direct Revenues
Environmental Services		$1,550,114			$108,856					$1,658,970						$1,468,417			$101,824						$1,570,241
Safety-Kleen		990,146			(105,540)					884,606						972,534			(99,250)						873,284
Corporate Items		925			(3,316)					(2,391)						1,148			(2,574)						(1,426)
Total		$2,541,185			$—					$2,541,185						$2,442,099			$—						$2,442,099

		For the Three Months Ended:					For the Nine Months Ended:
Adjusted EBITDA		September 30, 2019		September 30, 2018			September 30, 2019		September 30, 2018
Environmental Services		$121,658		$102,419			$329,036		$273,035
Safety-Kleen		81,326		79,502			215,578		214,455
Corporate Items		(46,371)		(40,644)			(136,513)		(118,387)
Total		$156,613		$141,277			$408,101		$369,103

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191030005510/en/

Source: Clean Harbors, Inc.

Michael L. Battles
EVP and Chief Financial Officer
Clean Harbors, Inc.
781.792.5100
InvestorRelations@cleanharbors.com

Jim Buckley
SVP Investor Relations
Clean Harbors, Inc.
781.792.5100
Buckley.James@cleanharbors.com