Back to all news

Clean Harbors Reports Second-Quarter 2014 Financial Results

  View printer-friendly version

  • Company Posts Q2 Revenue of $858.5 Million and EPS of $0.47
  • Achieves Adjusted EBITDA of $135.8 Million; Margin Increases to 15.8%
  • $75 Million Cost Reduction Program Proceeding on Plan
  • Technical Services Segment Grows 5% on Continued Safety-Kleen Contributions
  • Company Raises Low End of 2014 Adjusted EBITDA Guidance Range Based on Cost Savings

NORWELL, Mass.--(BUSINESS WIRE)--Aug. 6, 2014-- 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 second quarter and six months ended June 30, 2014.

Revenues for the second quarter were $858.5 million, compared with $860.5 million in the same period in 2013. Income from operations in the second quarter of 2014 increased 26% to $67.1 million, compared with $53.2 million in the same period of 2013.

Second-quarter 2014 net income increased 25% to $28.7 million, or $0.47 per diluted share, compared with $22.9 million, or $0.38 per diluted share, in the second quarter of 2013. Second-quarter 2014 net income included $4.0 million of pre-tax integration and severance costs. Second-quarter 2013 net income included pre-tax integration and severance costs of approximately $6.8 million. The effective tax rate in the second quarter of 2014 was 39.1%, compared with 35.1% in the same period of last year.

Adjusted EBITDA (see description below) in the second quarter of 2014 increased to $135.8 million, compared with $123.6 million in the same period of 2013.

Comments on the Second Quarter

“We rebounded from a slow start to the year and moved into what is historically a seasonally stronger period for the Company,” said Alan S. McKim, Chairman and Chief Executive Officer. “Our top-line results were slightly below our guidance range, hampered by some project delays and reduced activity in the Oil Sands region as well as a larger-than-expected revenue decrease in Oil and Gas Field Services. Conversely, we delivered better-than-expected margins and exceeded our Adjusted EBITDA guidance for the quarter, benefiting from cost reduction initiatives, a focus on high-margin opportunities and strong contributions from Technical Services. Our Adjusted EBITDA margins increased to 15.8% – 140 basis points higher than a year ago.”

“Technical Services delivered an outstanding quarter with Adjusted EBITDA growth of more than 20% on 5% revenue growth,” McKim said. “Incineration utilization reached 95% in the quarter as we continued to drive incremental volumes from SK Environmental Services. Oil Re-refining and Recycling also was a strong performer, achieving double-digit growth in revenues and profitability. Industrial and Field Services continued to be affected by the negative impact of currency translation on our Canadian operations, as well as the ongoing project slowdown in Canada, particularly in the Oil Sands. Oil and Gas Field Services experienced continued softness in the seismic business due to market conditions, as well as the unfavorable currency translation effect.”

Based on organizational changes the Company recently made as part of its operational review, Lodging Services – previously reported as part of Industrial and Field Services – will now be reported as a separate segment. “As a result of the slowdown in Oil Sands projects and higher near-term maintenance costs, Lodging Services revenue and profitability were down year-over-year,” McKim said.

“Our previously announced cost reduction program proceeded on schedule in the second quarter and we remain on course to attain our full-year goal of $75 million. We completed our planned headcount reductions early in the quarter and moved forward with a broad range of initiatives aimed at lowering our cost structure and improving our returns. In addition to the cost reductions, we also launched an array of margin improvement initiatives, including our pay-for-oil (PFO) program. In Q2, we lowered our PFO costs by two cents per gallon from the first quarter and we continue to make progress in this area. In addition, we executed on our share repurchase program, purchasing $15 million worth of Clean Harbors stock in the quarter,” McKim said.

Business Outlook and Financial Guidance

“As we move into the second half of 2014, we are encouraged by trends within our Technical Services segment and the volumes we are continuing to drive into our network, particularly from Safety-Kleen,” McKim said. “Within Oil Re-refining and Recycling, we are continuing to sell more blended product, lower PFO costs and increase efficiencies. However, the Company is continuing to experience softness in certain markets such as the Oil Sands, which is affecting our outlook for both Industrial and Field Services and Lodging Services. Challenges also remain in Oil and Gas Field Services, which continues to underperform. As a result of these factors, we expect to conclude the year at the low end of our revenue guidance range to reflect current market conditions.”

“At the same time, we are increasing the low end of our Adjusted EBITDA guidance range,” McKim said. “This increase is driven by the success of our $75 million cost savings program and our margin enhancement initiatives. We also continue to allocate resources and capital toward growing our most profitable businesses.”

“Going forward, we will look to increase our organic growth while continuing to improve our margin performance. We believe that our recent reconfiguration of our sales organization will be a driving force in generating momentum in the areas of cross selling and new business development. Overall, our pipeline of pending business remains solid, particularly within Technical Services, as we continue to target large-scale projects that drive significant volumes to our disposal facilities,” McKim concluded.

Based on its first-half financial performance, current market conditions and the effect of its cost savings program, Clean Harbors is updating its 2014 guidance. The Company now expects to be at the low end of its previously announced revenue range of $3.5 billion to $3.6 billion. Based on its ongoing cost reduction program, the Company now expects 2014 Adjusted EBITDA in the range of $535 million to $555 million, compared with its previous guidance of $525 million to $555 million. A reconciliation of the Company’s Adjusted EBITDA guidance to net income guidance is included below.

For the third quarter of 2014, the Company expects revenue in the range of $890 million to $910 million. The Company expects to generate Adjusted EBITDA for the third quarter of 2014 in the range of $155 million to $160 million. A reconciliation of the Company’s Adjusted EBITDA guidance to net income guidance is included below.

Non-GAAP Results

Clean Harbors reports Adjusted EBITDA results, which is a non-GAAP financial measure, as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP). The Company believes that Adjusted EBITDA provides additional useful information to investors since the Company’s loan covenants are based upon levels of Adjusted EBITDA achieved. The Company defines Adjusted EBITDA in accordance with its existing credit agreement, as described in the following reconciliation showing the differences between reported net income and Adjusted EBITDA for the second quarter and first six months of 2014 and 2013 (in thousands):

           
For the Three Months Ended: For the Six Months Ended:
June 30, 2014   June 30, 2013 June 30, 2014   June 30, 2013
 
Net income $ 28,672 $ 22,902 $ 37,632 $ 33,404
Accretion of environmental liabilities 2,609 2,879 5,333 5,714
Depreciation and amortization 66,075 67,468 135,431 127,474
Other expense (income) 655 (1,655 ) (3,523 ) (2,180 )
Interest expense, net 19,382 19,585 38,936 39,458
Pre-tax, non-cash acquisition accounting inventory adjustment 13,559
Provision for income taxes   18,406   12,411     23,976     17,389  
Adjusted EBITDA $ 135,799 $ 123,590   $ 237,785   $ 234,818  
 

Adjusted EBITDA Guidance Reconciliation

An itemized reconciliation between projected net income and projected Adjusted EBITDA is as follows:

       
For the Quarter Ending September 30, 2014
Amount     Margin % (1)
(In millions)    
Projected GAAP net income $ 38   to   $ 43 4.3 % to 4.7 %
Adjustments:
Accretion of environmental liabilities 3 to 3 0.4 % to 0.3 %
Depreciation and amortization 70 to 68 7.9 % to 7.5 %
Interest expense, net 20 to 20 2.2 % to 2.2 %
Provision for income taxes   24   to     26 2.6 %   to   2.9 %
Projected Adjusted EBITDA $ 155   to   $ 160 17.4 %   to   17.6 %
 
Revenues (In millions) $ 890 to $ 910
 
       
For the Year Ending December 31, 2014
Amount     Margin % (1)
(In millions)    
Projected GAAP net income $ 99   to   $ 117 2.8 % to 3.2 %
Adjustments:
Accretion of environmental liabilities 13 to 11 0.4 % to 0.3 %
Depreciation and amortization 280 to 275 8.0 % to 7.6 %
Interest expense, net 80 to 79 2.3 % to 2.2 %
Provision for income taxes   63   to     73 1.8 %   to   2.1 %
Projected Adjusted EBITDA $ 535   to   $ 555 15.3 %   to   15.4 %
 
Revenues (In millions) $ 3,500 to $ 3,600
 

(1) The Margin % indicates the percentage that the line-item represents to total revenues for the respective reporting period, calculated by dividing the dollar amount for the line-item by total revenues for the reporting period.

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. On 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 Investors 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 of the call. If you are unable to listen to the live 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 the Fortune 500, across the chemical, energy, manufacturing and additional markets, 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,” 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 INCOME

(in thousands except per share amounts)

 
For the Three Months Ended: For the Six Months Ended:
June 30, 2014   June 30, 2013 June 30, 2014   June 30, 2013
 
Revenues $ 858,480 $ 860,528 $ 1,705,147 $ 1,722,691
Cost of revenues (exclusive of items shown separately below) 606,950 614,326 1,232,669 1,250,350
Selling, general and administrative expenses 115,731 122,612 234,693 251,082
Accretion of environmental liabilities 2,609 2,879 5,333 5,714
Depreciation and amortization   66,075     67,468     135,431     127,474  
Income from operations 67,115 53,243 97,021 88,071
Other (expense) income (655 ) 1,655 3,523 2,180
Interest expense, net   (19,382 )   (19,585 )   (38,936 )   (39,458 )
Income before provision for income taxes 47,078 35,313 61,608 50,793
Provision for income taxes   18,406     12,411     23,976     17,389  
Net income $ 28,672   $ 22,902   $ 37,632   $ 33,404  
Earnings per share:
Basic $ 0.47   $ 0.38   $ 0.62   $ 0.55  
Diluted $ 0.47   $ 0.38   $ 0.62   $ 0.55  
 
Shares used to compute earnings per share — Basic   60,665     60,550     60,695     60,507  
Shares used to compute earnings per share — Diluted  

60,778

    60,687    

60,822

    60,658  
 
           
 

CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 
June 30, 2014 December 31, 2013
Current assets:
Cash and cash equivalents $ 278,644 $ 310,073
Marketable securities 12,435
Accounts receivable, net 575,187 579,394
Unbilled accounts receivable 35,529 26,568
Deferred costs 17,909 16,134
Inventories and supplies 161,792 152,096
Prepaid expenses and other current assets 48,991 41,962
Deferred tax assets   32,239   32,517
Total current assets   1,150,291   1,171,179
Property, plant and equipment, net   1,611,298   1,602,170
Other assets:
Deferred financing costs 19,284 20,860
Goodwill 578,974 570,960
Permits and other intangibles, net 553,658 569,973
Other   18,938   18,536
Total other assets 1,170,854 1,180,329
Total assets $ 3,932,443 $ 3,953,678
Current liabilities:
Current portion of capital lease obligations $ 709 $ 1,329
Accounts payable 262,553 316,462
Deferred revenue 61,593 55,454
Accrued expenses 245,368 236,829
Current portion of closure, post-closure and remedial liabilities   36,043   29,471
Total current liabilities 606,266 639,545
Other liabilities:
Closure and post-closure liabilities, less current portion 43,630 41,201
Remedial liabilities, less current portion 138,036 148,911
Long-term obligations 1,395,000 1,400,000
Capital lease obligations, less current portion 827 1,435
Deferred taxes, unrecognized tax benefits and other long-term liabilities   249,968   246,947
Total other liabilities 1,827,461 1,838,494
Total stockholders’ equity, net   1,498,716   1,475,639
Total liabilities and stockholders’ equity $ 3,932,443 $ 3,953,678
       

Supplemental Segment Data (in thousands)

 
For the Three Months Ended:
Revenue June 30, 2014     June 30, 2013

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Technical Services $ 256,798   $ 40,860   $ 297,658 $ 256,262   $ 27,128   $ 283,390
Industrial and Field Services 185,154 (11,011 ) 174,143 199,225 (12,808 ) 186,417
Oil Re-refining and Recycling 144,016 (54,866 ) 89,150 123,008 (48,261 ) 74,747
SK Environmental Services 171,324 23,307 194,631 166,523 32,207 198,730
Lodging Services 42,872 925 43,797 46,685 1,308 47,993
Oil and Gas Field Services 58,177 1,597 59,774 68,444 1,689 70,133
Corporate Items   139     (812 )     (673 )   381     (1,263 )     (882 )
Total $ 858,480   $     $ 858,480   $ 860,528   $     $ 860,528  
 
        For the Six Months Ended:
Revenue June 30, 2014     June 30, 2013

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Technical Services $ 493,579   $ 78,693   $ 572,272 $ 490,201   $ 52,399   $ 542,600
Industrial and Field Services 347,114 (22,614 ) 324,500 368,846 (26,546 ) 342,300
Oil Re-refining and Recycling 272,937 (102,982 ) 169,955 263,092 (98,287 ) 164,805
SK Environmental Services 332,712 43,206 375,918 326,325 67,161 393,486
Lodging Services 99,566 1,320 100,886 100,015 2,026 102,041
Oil and Gas Field Services 158,949 3,698 162,647 183,607 5,433 189,040
Corporate Items (1)   290     (1,321 )     (1,031 )   (9,395 )     (2,186 )     (11,581 )
Total $ 1,705,147   $     $ 1,705,147   $ 1,722,691     $     $ 1,722,691  

(1) Corporate Items revenue for the six months ended June 30, 2013 includes one-time, non-cash reductions of approximately $10.2 million due to the impact of fair value acquisition accounting adjustments on Safety-Kleen’s historical deferred revenue at December 28, 2012. Revenue for the six reportable segments for the six months ended June 30, 2013 excludes such adjustments to maintain comparability with future operating results and reflect how the Company manages the business.

Non-GAAP Segment Results

Clean Harbors reports Adjusted EBITDA results, which is a non-GAAP financial measure, as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP) and believes that such information provides additional useful information to investors since the Company’s loan covenants are based upon levels of Adjusted EBITDA achieved. The Company defines Adjusted EBITDA in accordance with its existing credit agreement. See “Non-GAAP Results” for a reconciliation of the Company’s total Adjusted EBITDA to GAAP net income.

     
For the Three Months Ended: For the Six Months Ended:
Adjusted EBITDA June 30, 2014   June 30, 2013 June 30, 2014   June 30, 2013
 
Technical Services $ 84,297 $ 69,390 $ 146,474 $ 129,435
Industrial and Field Services 30,716 34,760 47,088 48,572
Oil Re-refining and Recycling 15,196 12,752 27,779 28,098
SK Environmental Services 31,307 34,076 54,132 61,082
Lodging Services 15,487 19,259 33,224 41,560
Oil and Gas Field Services 1,812 4,144 18,143 31,928
Corporate Items   (43,016 )   (50,791 )   (89,055 )   (105,857 )
Total $ 135,799   $ 123,590   $ 237,785   $ 234,818  
 

Source: Clean Harbors, Inc.

Clean Harbors, Inc.
James M. Rutledge, 781-792-5100
Vice Chairman, President and CFO
InvestorRelations@cleanharbors.com
or
Jim Buckley, 781-792-5100
SVP Investor Relations and Corporate Communications
Buckley.James@cleanharbors.com

Back to all news

close menu