Clean Harbors Reports Third-Quarter 2014 Financial Results

• Company Announces Q3 Revenue of $851.5 Million
• Posts Adjusted EPS of $0.45, Excluding a Non-Cash Goodwill Impairment Charge of $123.4 Million, Which Resulted in a GAAP EPS Loss of $1.55
• Achieves Adjusted EBITDA of $153.4 Million
• Adjusted EBITDA Margin Increases to 18.0% - Highest Level in Two Years
• Updates 2014 Revenue and Adjusted EBITDA Guidance

NORWELL, Mass.--(BUSINESS WIRE)--Nov. 5, 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 third quarter and nine months ended September 30, 2014.

Revenues for the third quarter were $851.5 million, compared with $907.5 million in the same period of 2013. The Company reported a loss from operations for the third quarter of 2014 of $42.7 million, compared with income from operations of $73.6 million in the third quarter of 2013. The third-quarter loss from operations includes a non-cash, pre-tax goodwill impairment charge of $123.4 million related to its Oil Re-refining and Recycling segment. Clean Harbors is recognizing the impairment charge based on the continued challenging environment in that business brought on by the recent, significantly lower base and blended oil prices. Excluding the impairment charge, the Company reported adjusted income from operations for the third quarter of 2014 of $80.7 million.

Third-quarter 2014 net loss was $93.3 million, or $1.55 per share, compared with net income of $35.4 million, or $0.58 per diluted share, in the same period of 2013. The third-quarter 2014 net loss includes the $123.4 million non-cash, pre-tax impairment charge, as well as $1.8 million of pre-tax integration and severance costs. Third-quarter 2013 net income included pre-tax integration and severance costs of $2.7 million. Excluding the impairment charge, the Company reported adjusted net income for the third quarter of 2014 of $27.4 million, or $0.45 per share.

Adjusted EBITDA (see description below) in the third quarter of 2014 increased 5% to $153.4 million, compared with $146.0 million in the same period of 2013. The Company purchased $37.6 million of Clean Harbors stock as part of its share repurchase program during the quarter.

Comments on the Third Quarter

“We delivered strong third-quarter Adjusted EBITDA and operating margins despite falling short of our revenue target,” said Alan S. McKim, Chairman and Chief Executive Officer. “Revenue was below our guidance range based on several factors. Project activity in the Oil Sands further slowed during the quarter, leading to softness in our Industrial and Field Services and Lodging Services segments. Oil and Gas Field Services underperformed due to commodity pressures and competition. Despite these headwinds, our focus on reducing costs and channeling resources to our most profitable businesses enabled us to achieve an Adjusted EBITDA margin of 18%, up nearly 200 basis points from a year ago.”

“Technical Services recorded another solid quarter with 10% Adjusted EBITDA growth on a 2% increase in revenue,” McKim said. “Incineration utilization was 90% as scheduled maintenance shutdowns at our two largest facilities initially planned for the fourth quarter were completed this quarter. Both Safety-Kleen segments delivered double-digit growth in profitability on small increases in revenue. The Industrial and Field Services, Oil and Gas Field Services, and Lodging Services segments were affected by the impact of currency translation on our Canadian operations, the ongoing slowdown in Western Canada, and lower project activity. As a result, all three business segments reported declines in both revenue and Adjusted EBITDA from a year ago.”

“One of the driving forces behind our strong margin performance this quarter, including a 90-basis-point improvement in SG&A percentage, was our ability to further reduce our cost structure. We have a broad array of cost reduction and margin improvement initiatives underway. These initiatives are proving successful, and we remain on track to achieve our previously stated goal of eliminating $75 million in annual expenses,” McKim said.

Business Outlook and Financial Guidance

“As we enter the final quarter of 2014, we see ongoing strength within our environmental-related businesses but expect continued headwinds across several segments,” McKim said. “Our Technical Services segment has built a large backlog entering the quarter as we continue to drive considerable volumes from Safety-Kleen and project-related work. Within SK Environmental Services, we are expanding through new branch locations and cross-selling. Within Oil Re-refining and Recycling, we are focused on lowering PFO costs, capturing greater transportation efficiencies and pursuing product differentiation and blended opportunities to help offset the recent declines in base oil pricing. Activity in the Oil Sands region remains weaker-than-expected, which is limiting opportunities for Industrial Services and Lodging Services. While our Oil and Gas Field Services segment is entering its stronger operating period as the winter drilling season approaches, overall conditions are not favorable near-term as our seismic business continues to underperform and energy markets remain under commodity pressure.”

Based on its year-to-date performance and current market conditions, Clean Harbors is adjusting its previously announced 2014 annual revenue and Adjusted EBITDA guidance. The Company now expects revenues in the range of $3.40 billion to $3.42 billion, compared with its previously announced range of $3.5 billion to $3.6 billion. The Company now expects Adjusted EBITDA in the range of $510 million to $520 million, compared with its previously announced range of $535 million to $555 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 third quarter and first nine months of 2014 and 2013 (in thousands):

				For the Three Months Ended:									For the Nine Months Ended:
				September 30, 2014					September 30, 2013				September 30, 2014					September 30, 2013
Net (loss) income				$	(93,337	)			$	35,361			$	(55,705	)			$	68,765
Accretion of environmental liabilities					2,642					2,914				7,975					8,628
Depreciation and amortization					70,049					69,430				205,480					196,904
Goodwill impairment charge					123,414					—				123,414					—
Other (income) expense					(613	)				150				(4,136	)				(2,030	)
Interest expense, net					19,494					19,326				58,430					58,784
Pre-tax, non-cash acquisition accounting inventory adjustment					—					—				—					13,559
Provision for income taxes					31,708					18,771				55,684					36,160
Adjusted EBITDA				$	153,357				$	145,952			$	391,142				$	380,770

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 provide 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 (loss) income from operations to adjusted income from operations, net (loss) income to adjusted net income and (loss) earnings per share to adjusted earnings per share for the three and nine months ended September 30, 2014 and 2013 (in thousands):

				For the Three Months Ended:						For the Nine Months Ended:
Adjusted income from operations				September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
(Loss) income from operations				$ (42,748)			$73,608			$ 54,273			$161,679
Goodwill impairment charge				123,414			—			123,414			—
Adjusted income from operations				$ 80,666			$73,608			$177,687			$161,679
Adjusted net income
Net (loss) income				$(93,337)			$35,361			$(55,705)			$68,765
Goodwill impairment charge, net of tax				120,750			—			120,750			—
Adjusted net income				$ 27,413			$35,361			$ 65,045			$68,765
Adjusted earnings per share
(Loss) earnings per share				$(1.55)			$ 0.58			$(0.92)			$1.13
Goodwill impairment charge, net of tax				2.00			—			1.99			—
Adjusted earnings per share				$ 0.45			$ 0.58			$ 1.07			$1.13

Adjusted EBITDA Guidance Reconciliation

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

					For the Year Ending December 31, 2014
					Amount											Margin % (1)
					(In millions)
Projected GAAP net loss					$	(42	)		to		$	(32	)			(1.2	)%		to		(0.9	)%
Adjustments:
Accretion of environmental liabilities						11			to			10				0.4	%		to		0.3	%
Depreciation and amortization						278			to			274				8.2	%		to		8.0	%
Goodwill impairment charge						123			to			123				3.6	%		to		3.6	%
Other income						(4	)		to			(4	)			(0.1	)%		to		(0.1	)%
Interest expense, net						79			to			78				2.3	%		to		2.3	%
Provision for income taxes						65			to			71				1.8	%		to		2.0	%
Projected Adjusted EBITDA					$	510			to		$	520				15.0	%		to		15.2	%
Revenues (In millions)					$	3,400			to		$	3,420

(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 Nine Months Ended:
					September 30, 2014						September 30, 2013						September 30, 2014						September 30, 2013
Revenues					$	851,465					$	907,535					$	2,556,612					$	2,630,226
Cost of revenues (exclusive of items shown separately below)						598,407						647,119						1,831,076						1,897,469
Selling, general and administrative expenses						99,701						114,464						334,394						365,546
Accretion of environmental liabilities						2,642						2,914						7,975						8,628
Depreciation and amortization						70,049						69,430						205,480						196,904
Goodwill impairment charge						123,414						—						123,414						—
(Loss) income from operations						(42,748	)					73,608						54,273						161,679
Other income (expense)						613						(150	)					4,136						2,030
Interest expense, net						(19,494	)					(19,326	)					(58,430	)					(58,784	)
(Loss) income before provision for income taxes						(61,629	)					54,132						(21	)					104,925
Provision for income taxes						31,708						18,771						55,684						36,160
Net (loss) income					$	(93,337	)				$	35,361					$	(55,705	)				$	68,765
(Loss) earnings per share:
Basic					$	(1.55	)				$	0.58					$	(0.92	)				$	1.14
Diluted					$	(1.55	)				$	0.58					$	(0.92	)				$	1.13
Shares used to compute (loss) earnings per share — Basic						60,369						60,610						60,585						60,542
Shares used to compute (loss) earnings per share — Diluted						60,369						60,760						60,585						60,692

CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
					September 30, 2014					December 31, 2013
Current assets:
Cash and cash equivalents					$	258,021				$	310,073
Marketable securities						—					12,435
Accounts receivable, net						575,575					579,394
Unbilled accounts receivable						50,050					26,568
Deferred costs						18,676					16,134
Inventories and supplies						170,934					152,096
Prepaid expenses and other current assets						48,540					41,962
Deferred tax assets						32,141					32,517
Total current assets						1,153,937					1,171,179
Property, plant and equipment, net						1,579,701					1,602,170
Other assets:
Deferred financing costs						18,403					20,860
Goodwill						449,577					570,960
Permits and other intangibles, net						541,874					569,973
Other						17,725					18,536
Total other assets						1,027,579					1,180,329
Total assets					$	3,761,217				$	3,953,678
Current liabilities:
Current portion of capital lease obligations					$	264				$	1,329
Accounts payable						251,832					316,462
Deferred revenue						63,909					55,454
Accrued expenses						260,123					236,829
Current portion of closure, post-closure and remedial liabilities						32,742					29,471
Total current liabilities						608,870					639,545
Other liabilities:
Closure and post-closure liabilities, less current portion						46,287					41,201
Remedial liabilities, less current portion						133,972					148,911
Long-term obligations						1,395,000					1,400,000
Capital lease obligations, less current portion						733					1,435
Deferred taxes, unrecognized tax benefits and other long-term liabilities						255,804					246,947
Total other liabilities						1,831,796					1,838,494
Total stockholders’ equity, net						1,320,551					1,475,639
Total liabilities and stockholders’ equity					$	3,761,217				$	3,953,678

Supplemental Segment Data (in thousands)
					For the Three Months Ended:
Revenue					September 30, 2014															September 30, 2013
					Third Party Revenues				Intersegment Revenues (Expense), net					Direct Revenues						Third Party Revenues				Intersegment Revenues (Expense), net					Direct Revenues
Technical Services					$	272,478			$	40,924				$	313,402					$	269,465			$	36,370				$	305,835
Industrial and Field Services						163,582				(9,205	)				154,377						174,829				(8,181	)				166,648
Oil Re-refining and Recycling						140,345				(52,606	)				87,739						131,934				(45,566	)				86,368
SK Environmental Services						170,980				21,212					192,192						170,166				17,164					187,330
Lodging Services						36,582				723					37,305						55,571				957					56,528
Oil and Gas Field Services						67,370				639					68,009						104,981				179					105,160
Corporate Items						128				(1,687	)				(1,559	)					589				(923	)				(334	)
Total					$	851,465			$	—				$	851,465					$	907,535			$	—				$	907,535

					For the Nine Months Ended:
Revenue					September 30, 2014															September 30, 2013
					Third Party Revenues				Intersegment Revenues (Expense), net					Direct Revenues						Third Party Revenues					Intersegment Revenues (Expense), net					Direct Revenues
Technical Services					$	766,057			$	119,617				$	885,674					$	759,666				$	88,769				$	848,435
Industrial and Field Services						510,696				(31,819	)				478,877						543,675					(34,727	)				508,948
Oil Re-refining and Recycling						413,282				(155,588	)				257,694						395,026					(143,853	)				251,173
SK Environmental Services						503,692				64,418					568,110						496,491					84,325					580,816
Lodging Services						136,148				2,043					138,191						155,586					2,983					158,569
Oil and Gas Field Services						226,319				4,337					230,656						288,588					5,612					294,200
Corporate Items (1)						418				(3,008	)				(2,590	)					(8,806	)				(3,109	)				(11,915	)
Total					$	2,556,612			$	—				$	2,556,612					$	2,630,226				$	—				$	2,630,226

(1) Corporate Items revenue for the nine months ended September 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 nine months ended September 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 Nine Months Ended:
Adjusted EBITDA					September 30, 2014						September 30, 2013						September 30, 2014						September 30, 2013
Technical Services					$	86,928					$	78,849					$	233,402					$	208,284
Industrial and Field Services						20,303						26,709						67,391						75,281
Oil Re-refining and Recycling						21,473						18,652						49,252						46,750
SK Environmental Services						30,853						23,192						84,985						84,274
Lodging Services						15,972						21,710						49,196						63,270
Oil and Gas Field Services						9,545						20,530						27,688						52,458
Corporate Items						(31,717	)					(43,690	)					(120,772	)					(149,547	)
Total					$	153,357					$	145,952					$	391,142					$	380,770

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