Clean Harbors Reports Second-Quarter 2015 Financial Results

• Announces Record Revenue of $936.2 Million as Company Benefits from Participation in Emergency Response Efforts
• Reports Adjusted EPS of $0.72, Excluding a Non-Cash Goodwill Impairment Charge of $32 Million in Oil and Gas Segment, Resulting in GAAP EPS of $0.18
• Achieves Record Adjusted EBITDA of $163.1 Million, Up 20% from Prior Year
• Posts Adjusted EBITDA Margin Increase of 160 Basis Points to 17.4%
• Confirms 2015 Adjusted EBITDA Guidance Range of $530 Million to $570 Million

NORWELL, Mass.--(BUSINESS WIRE)--Aug. 5, 2015-- Clean Harbors, Inc. (“Clean Harbors”) (NYSE: CLH), the leading provider of environmental, energy and industrial services throughout North America, today announced financial results for its fiscal second quarter ended June 30, 2015.

“Clean Harbors delivered record second-quarter financial results, as substantial emergency response activity and strong contributions from several of our businesses more than offset weakness in our energy-related businesses and the adverse effects of foreign currency translation,” said Alan S. McKim, Chairman and Chief Executive Officer. “Our excellent operating performance produced the highest quarterly revenue in our Company’s history and Adjusted EBITDA that exceeded our previously announced guidance range.”

Revenues for the second quarter of 2015 were $936.2 million, up 9% from $858.5 million in the same period in 2014. Income from operations was $60.8 million in the second quarter of 2015, compared with $67.1 million in the same period last year. Second-quarter 2015 income from operations included a non-cash goodwill impairment charge of $32.0 million related to the Oil and Gas Field Services segment. The Company recognized the impairment charge due to that business segment’s continuing challenges, including impacts from lower crude oil pricing such as reduced exploration budgets, lower North American rig counts and decreased overall customer spending. Excluding the non-cash impairment charge, the Company reported adjusted income from operations of $92.8 million for the second quarter of 2015.

Second-quarter 2015 net income was $10.4 million, or $0.18 per diluted share, which included the non-cash impairment charge and $1.8 million of pre-tax integration and severance costs. Excluding the impairment charge, the Company reported adjusted net income for the second quarter of 2015 of $42.4 million, or $0.72 per diluted share. This compares with second-quarter 2014 net income of $28.7 million, or $0.47 per diluted share, which included $4.0 million of pre-tax integration and severance costs.

Adjusted EBITDA (see description below) in the second quarter of 2015 increased 20% to a record $163.1 million from $135.8 million in the same period of 2014. Adjusted EBITDA margin climbed 160 basis points to 17.4%, compared with 15.8% in the second quarter of 2014.

Comments on the Second Quarter

“During the second quarter, we participated in several major emergency response efforts to address natural disasters, pipeline spills, avian flu, rail-related accidents and damage to fixed facilities,” McKim said. “With our extensive capabilities to respond to large-scale emergencies and safely handle hazardous waste, we’re often called upon to marshal our resources to deal with these sizeable projects effectively. These unplanned events often involve national emergencies and major oil or chemical releases. For the second quarter, our activity related to this work generated revenue of approximately $170 million.

“Our emergency response efforts resulted in considerable year-over-year growth in our Industrial and Field Services segment, supported by a strong performance in our U.S. Industrial group and base Field Services business. SK Environmental Services generated top-line growth and a double-digit increase in profitability, attributable to business mix, pricing and the addition of Thermo Fluids (TFI). Our Oil Re-refining and Recycling segment rebounded sharply from the first quarter, delivering improved profitability that reflected the success of our ongoing efforts to lower our average pay-for-oil (PFO) cost. Technical Services had a solid quarter, but profitability declined from that of the prior year, due to a delay in some large waste projects, reduced energy waste streams and outages at our two largest incinerators. Incineration utilization remained stable at 91%, but landfill volumes were down 29% from those of a year ago. Both our Oil and Gas Field Services and Lodging Services segments continued to fall short of our expectations as a result of ongoing softness in the energy markets and its corresponding effects in the Oil Sands region, as well as currency translation.”

Business Outlook and Financial Guidance

“We enter the second half of 2015 confident of our prospects for the full year, as we build on momentum across several businesses,” McKim said. “Industrial and Field Services will benefit from emergency response work that has carried into the third quarter, increased turnaround activity and growth in Field Services from its collaboration with Safety-Kleen. Technical Services has an impressive pipeline of large-volume waste projects to support its growth as we move into the segment’s seasonally strongest quarter. SK Environmental Services continues to outperform, generating both volume and pricing gains, and the addition of TFI provides another platform for growth. Within Oil Re-refining and Recycling, our efforts to expand the spread are proving successful, and we will continue to seek to lower our used oil collection and transportation costs.

“Activities related to the planned carve-out of our Oil and Gas Field Services and Lodging Services segments remain on track. We intend to have this be a standalone entity capable of going public by January 1, 2016, and we currently expect to complete an IPO during 2016, depending on market conditions and Board approval. Within the two business segments planned to be carved out, we are seeing some positive signs. Our seismic group is targeting several major Alaskan projects that will support the performance of Oil and Gas Field Services in the second half of the year. Lodging Services has been awarded some business in British Columbia for later this year and into early 2016, and the business is successfully targeting some unconventional markets as it continues to weather ongoing challenges in the Oil Sands region.

“Overall, we believe we are well-positioned for continued success in 2015 as we benefit from the diversity of our business model. Although the energy markets remain depressed, we see opportunities to add profitable growth in the environmental and industrial areas of our business through selective acquisitions and strategic investments that will capitalize on the leverage inherent in our extensive network and asset base,” McKim concluded.

Based on its second-quarter performance, current market conditions and the impact of emergency response events, Clean Harbors is reaffirming its previously announced 2015 Adjusted EBITDA guidance range of $530 million to $570 million. A reconciliation of the Company’s Adjusted EBITDA guidance to net income guidance is included below.

For the third quarter of 2015, the Company expects to generate Adjusted EBITDA in the range of $165 million to $170 million.

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 three and six months ended June 30, 2015 and 2014 (in thousands):

				For the Three Months Ended:								For the Six Months Ended:
				June 30, 2015				June 30, 2014				June 30, 2015				June 30, 2014
Net income				$10,395				$28,672				$3,306				$37,632
Accretion of environmental liabilities					2,599				2,609				5,218				5,333
Depreciation and amortization					67,773				66,075				136,129				135,431
Goodwill impairment charge					31,992				—				31,992				—
Other expense (income)					660				655				251				(3,523)
Interest expense, net					19,249				19,382				38,687				38,936
Provision for income taxes					30,454				18,406				25,816				23,976
Adjusted EBITDA				$163,122				$135,799				$241,399				$237,785

This press release includes a discussion of income from operations, net income and earnings per share amounts adjusted for the goodwill impairment charge 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 income from operations to adjusted income from operations, net income to adjusted net income and earnings per share to adjusted earnings per share for the three and six months ended June 30, 2015 and 2014 (in thousands,except per share amounts):

				For the Three Months Ended:								For the Six Months Ended:
Adjusted income from operations				June 30, 2015				June 30, 2014				June 30, 2015				June 30, 2014
Income from operations				$	60,758			$	67,115			$	68,060			$	97,021
Goodwill impairment charge					31,992				—				31,992				—
Adjusted income from operations				$	92,750			$	67,115			$	100,052			$	97,021
Adjusted net income
Net income				$	10,395			$	28,672			$	3,306			$	37,632
Goodwill impairment charge					31,992				—				31,992				—
Adjusted net income				$	42,387			$	28,672			$	35,298			$	37,632
Adjusted earnings per share
Earnings per share				$	0.18			$	0.47			$	0.06			$	0.62
Goodwill impairment charge					0.54				—				0.54				—
Adjusted earnings per share				$	0.72			$	0.47			$	0.60			$	0.62

Adjusted EBITDA Guidance Reconciliation

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

				For the Quarter Ending September 30, 2015					For the Year Ending December 31, 2015
				Amount					Amount
				(In millions)					(In millions)
Projected GAAP net income				$42	to	$48			$64	to	$95
Adjustments:
Accretion of environmental liabilities				3	to	3			11	to	10
Depreciation and amortization				69	to	66			275	to	265
Goodwill impairment charge				—	to	—			32	to	32
Interest expense, net				19	to	19			76	to	76
Provision for income taxes				32	to	34			72	to	92
Projected Adjusted EBITDA				$165	to	$170			$530	to	$570

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 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 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, the Company’s planned carve-out 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, 2015			June 30, 2014			June 30, 2015			June 30, 2014
Revenues				$936,228			$858,480			$1,668,727			$1,705,147
Cost of revenues (exclusive of items shown separately below)				652,688			606,950			1,199,195			1,232,669
Selling, general and administrative expenses				120,418			115,731			228,133			234,693
Accretion of environmental liabilities				2,599			2,609			5,218			5,333
Depreciation and amortization				67,773			66,075			136,129			135,431
Goodwill impairment charge				31,992			—			31,992			—
Income from operations				60,758			67,115			68,060			97,021
Other (expense) income				(660)			(655)			(251)			3,523
Interest expense, net				(19,249)			(19,382)			(38,687)			(38,936)
Income before provision for income taxes				40,849			47,078			29,122			61,608
Provision for income taxes				30,454			18,406			25,816			23,976
Net income				$10,395			$28,672			$3,306			$37,632
Earnings per share:
Basic				$0.18			$0.47			$0.06			$0.62
Diluted				$0.18			$0.47			$0.06			$0.62
Shares used to compute earnings per share — Basic				58,590			60,665			58,732			60,695
Shares used to compute earnings per share — Diluted				58,710			60,778			58,832			60,822

CLEAN HARBORS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
				June 30, 2015				December 31, 2014
Current assets:
Cash and cash equivalents				$	173,621			$	246,879
Accounts receivable, net					684,875				557,131
Unbilled accounts receivable					37,095				40,775
Deferred costs					19,575				19,018
Inventories and supplies					149,861				168,663
Prepaid expenses and other current assets					60,880				57,435
Deferred tax assets					37,410				36,532
Total current assets					1,163,317				1,126,433
Property, plant and equipment, net					1,562,254				1,558,834
Other assets:
Deferred financing costs					15,941				17,580
Goodwill					452,858				452,669
Permits and other intangibles, net					534,621				530,080
Other					17,646				18,682
Total other assets					1,021,066				1,019,011
Total assets				$	3,746,637			$	3,704,278
Current liabilities:
Current portion of capital lease obligations				$	45			$	536
Accounts payable					365,088				267,329
Deferred revenue					64,642				62,966
Accrued expenses					241,098				219,549
Current portion of closure, post-closure and remedial liabilities					26,321				22,091
Total current liabilities					697,194				572,471
Other liabilities:
Closure and post-closure liabilities, less current portion					44,153				45,702
Remedial liabilities, less current portion					130,149				138,029
Long-term obligations					1,395,000				1,395,000
Deferred taxes, unrecognized tax benefits and other long-term liabilities					306,705				290,205
Total other liabilities					1,876,007				1,868,936
Total stockholders’ equity, net					1,173,436				1,262,871
Total liabilities and stockholders’ equity				$	3,746,637			$	3,704,278

Supplemental Segment Data (in thousands)
				For the Three Months Ended:
Revenue				June 30, 2015													June 30, 2014
				Third Party Revenues				Intersegment Revenues (Expense), net				Direct Revenues					Third Party Revenues				Intersegment Revenues (Expense), net				Direct Revenues
Technical Services				$	248,025			$	39,397			$	287,422				$	256,798			$	40,860			$	297,658
Industrial and Field Services					353,329				(11,631)				341,698					185,154				(11,011)				174,143
Oil Re-refining and Recycling					99,104				(21,429)				77,675					144,016				(54,866)				89,150
SK Environmental Services					175,876				(8,799)				167,077					171,324				23,307				194,631
Lodging Services					21,171				1,072				22,243					42,872				925				43,797
Oil and Gas Field Services					38,617				2,194				40,811					58,177				1,597				59,774
Corporate Items					106				(804)				(698)					139				(812)				(673)
Total				$	936,228			$	—			$	936,228				$	858,480			$	—			$	858,480

				For the Six Months Ended:
Revenue				June 30, 2015													June 30, 2014
				Third Party Revenues				Intersegment Revenues (Expense), net				Direct Revenues					Third Party Revenues				Intersegment Revenues (Expense), net				Direct Revenues
Technical Services				$	488,350			$	75,598			$	563,948				$	493,579			$	78,693			$	572,272
Industrial and Field Services					500,197				(18,114)				482,083					347,114				(22,614)				324,500
Oil Re-refining and Recycling					195,911				(39,687)				156,224					272,937				(102,982)				169,955
SK Environmental Services					336,560				(20,381)				316,179					332,712				43,206				375,918
Lodging Services					55,275				1,253				56,528					99,566				1,320				100,886
Oil and Gas Field Services					92,204				3,535				95,739					158,949				3,698				162,647
Corporate Items					230				(2,204)				(1,974)					290				(1,321)				(1,031)
Total				$	1,668,727			$	—			$	1,668,727				$	1,705,147			$	—			$	1,705,147

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, 2015			June 30, 2014			June 30, 2015			June 30, 2014
Technical Services				$76,808			$84,297			$140,209			$146,474
Industrial and Field Services				73,081			30,716			83,390			47,088
Oil Re-refining and Recycling				15,824			15,196			11,348			27,779
SK Environmental Services				41,195			31,307			68,444			54,132
Lodging Services				3,852			15,487			10,762			33,224
Oil and Gas Field Services				(2,182)			1,812			(779)			18,143
Corporate Items				(45,456)			(43,016)			(71,975)			(89,055)
Total				$163,122			$135,799			$241,399			$237,785

View source version on businesswire.com: http://www.businesswire.com/news/home/20150805005787/en/

Source: Clean Harbors, Inc.

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