Back to all news

Clean Harbors Announces Third-Quarter 2019 Financial Results

  View printer-friendly version

  • 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

 

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

Back to all news

close menu