Clean Harbors Reports Third-Quarter 2012 Financial Results

  • Company Reports Revenue of $533.8 Million
  • Landfill Business Delivers Record Quarter
  • Company Achieves EBITDA Margin of 18.8%
  • Safety-Kleen Acquisition Expected to Close by Year-end
  • Updates 2012 Guidance and Provides Preliminary 2013 Guidance

NORWELL, Mass.--()--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, 2012.

Revenues for the third quarter were $533.8 million compared with $556.1 million in the same period in 2011. Revenue in the third quarter of 2011 included approximately $42 million in emergency response revenue related to the Yellowstone River oil spill. For the first nine months of 2012, revenue grew 13% to $1.6 billion from $1.4 billion in the same period in 2011. Income from operations in the third quarter of 2012 decreased to $56.7 million from $66.8 million in the same period of 2011 primarily based on lower revenue and an increase in depreciation and amortization expense. For the first nine months of 2012, income from operations increased to $166.0 million from $158.4 million in the first nine months of 2011.

Third quarter 2012 net income was $12.4 million, or $0.23 per diluted share, compared with $37.1 million, or $0.70 per diluted share, in the third quarter of 2011. The third quarter of 2012 included a $26.4 million pre-tax charge related to the Company’s recent senior debt refinancing. Adjusted net income, excluding the charge, was $28.8 million, or $0.54 per diluted share. Net income for the first nine months of 2012 was $67.8 million, or $1.27 per diluted share, compared with $89.0 million, or $1.67 per diluted share. Adjusted net income for the first nine months of 2012, excluding the charge, was $84.3 million, or $1.57 per diluted share.

EBITDA (see description below) was $100.5 million in the third quarter of 2012 compared with $103.8 million in the same period of 2011. For the first nine months of 2012, EBITDA grew 15% to $290.2 million from $252.6 million in the same period of 2011.

Comments on the Third Quarter

“Solid contributions from our Technical Services and Industrial Services segments enabled us to deliver high EBITDA margins of 18.8% and top $100 million in quarterly EBITDA for only the third time in our history,” said Alan S. McKim, Chairman and Chief Executive Officer. “Our EBITDA results were driven by increased efficiencies and economies of scale from our acquisitions, productivity gains across our asset base and our comprehensive cost reduction initiatives. Our third-quarter performance also reflected the diversity of our business as strong results in incineration, landfills and oil sands offset a lack of emergency response revenue and a slowdown in oil and gas field services.”

“Within our operating segments, Technical Services had a strong quarter as the utilization rate at our incineration facilities was a robust 91.3% based on higher U.S. volumes,” McKim said. “At the same time, our landfills business generated a record performance this quarter with a substantial increase in volumes, driven by large-scale projects and Bakken-related work. Excluding revenue related to the Yellowstone River oil spill in 2011, our Field Services segment was flat year-over-year. This is the fourth consecutive quarter in which we have not recorded a major emergency response event.”

“Our Industrial Services segment had an excellent quarter, achieving 17% growth and significantly improving its margins,” McKim said. “This segment benefited from steady Oil Sands related work, strong utilization within our lodging business and a high level of cross-selling activity with our refinery customers. Within our Oil & Gas Field Services segment, our revenue was down from the prior year due to the repositioning of our solids control assets in the U.S. and unfavorable weather conditions in Western Canada.”

Non-GAAP Results

Clean Harbors reports EBITDA and adjusted net income results, which are non-GAAP financial measures, as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP). The Company believes that EBITDA provides additional useful information to investors since the Company’s loan covenants are based upon levels of EBITDA achieved. The Company defines EBITDA in accordance with its existing credit agreement, as described in the following reconciliation showing the differences between reported net income and EBITDA for the three and nine months ended September 30, 2012 and 2011 (in thousands):

    For the three months ended:     For the nine months ended:

September 30,
2012

 

September 30,
2011

September 30,
2012

 

September 30,
2011

   
Net income $12,359 $37,133 $67,800 $89,019
Accretion of environmental liabilities 2,488 2,435 7,409 7,231
Depreciation and amortization 41,300 34,604 116,794 87,000
Other expense (income) 91 (164) 465 (5,931)
Loss on early extinguishment of debt 26,385

 

26,385
Interest expense, net 11,596 10,927 33,836 28,047
Provision for income taxes 6,308   18,896 37,487   47,283
EBITDA $100,527   $103,831 $290,176   $252,649
 

The Company provides adjusted net income so that analysts, investors and other interested parties have the same data it uses to assess its core operating performance. The following reconciliation shows the differences between reported net income and adjusted net income for the three and nine months ended September 30, 2012 and 2011 (in thousands):

    For the three months ended:     For the nine months ended:

September 30,
2012

 

September 30,
2011

September 30,
2012

 

September 30,
2011

   
Net income $12,359 $37,133 $67,800 $89,019

Loss on early extinguishment of debt, net of tax

16,461  

16,461

 
Adjusted net income $28,820   $37,133 $84,261   $89,019
Adjusted net income per share $0.54   $0.70 $1.57   $1.67
 

Business Outlook and Financial Guidance

“As we near the conclusion of 2012, we remain encouraged about our overall prospects,” McKim said. “While we experienced some turbulence in certain markets in 2012, the underlying industry and outsourcing trends remain favorable for the long-term outlook of all four of our operating segments. We are building momentum across all of our lines of business. Within our Environmental business, we continue to have an active pipeline of projects and ongoing engagements to generate a sizeable amount of waste volumes. Within our Energy & Industrial business, we are looking forward to entering its strongest operating periods during the cold winter months, particularly in Western Canada and more remote locations.”

“Our favorable outlook is further supported by the recent announcement of a definitive agreement to acquire Safety-Kleen. This $1.25 billion transaction, which we continue to expect to complete by year-end, is the largest in Clean Harbors’ history and we believe will add significant long-term value for our shareholders. With industry-leading assets, a talented workforce and a strong commitment to sustainability, Safety-Kleen is a recognized leader in the environmental services field. The addition of its re-refining waste oil and expanded solvent recycling capabilities will significantly broaden our portfolio of services. We also expect to benefit from the consistent volumes that its business can generate for our network of waste disposal facilities. Upon completion, we believe the merger of our two businesses should extend our growth momentum in 2013 and beyond, and greatly enhance our cash flow generation going forward,” McKim concluded.

Based on its year-to-date performance and current market conditions, Clean Harbors is updating its 2012 annual revenue and EBITDA guidance. The Company now expects 2012 revenues in the range of $2.15 billion to $2.16 billion, revised from its previously announced guidance of $2.20 billion to $2.25 billion. For 2012, the Company now expects EBITDA in the range of $375 million to $380 million, revised from its previously announced guidance of $400 million to $410 million. This guidance does not include the revenues from the Company’s emergency response efforts associated with Hurricane Sandy as it is too early to estimate the duration of the clean-up activities presently being performed by more than 500 Clean Harbors personnel at various sites.

Based upon preliminary estimates of the markets it serves, the Company expects 2013 revenues in the range of $2.30 billion to $2.35 billion. The Company expects its EBITDA margin to be approximately 18.5% at this level of growth in 2013, which translates into an EBITDA range of $425 million to $435 million. This guidance is exclusive of the planned acquisition of Safety-Kleen or any other potential future acquisitions. As Clean Harbors completes its 2013 budgeting process in the coming months, it plans to update this preliminary guidance in conjunction with the announcement of its fourth-quarter and year-end results in February 2013.

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, recently announced acquisition of Safety-Kleen, business outlook and growth strategy.

Investors who wish to listen to the webcast 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 is the leading provider of environmental, energy and industrial services throughout North America. The Company serves more than 60,000 customers, including a majority of the Fortune 500 companies, thousands of smaller private entities and numerous federal, state, provincial and local governmental agencies.

Headquartered in Norwell, Massachusetts, Clean Harbors has more than 200 locations, including over 50 waste management facilities, throughout North America in 38 U.S. states, seven Canadian provinces, 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 the Company’s business outlook and financial guidance 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 the Company’s most recently filed Form 10-K and Form 10-Q. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements other than through its various filings with the Securities and Exchange Commission, which may be viewed in the “Investors” section of the Company’s 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,     September 30, September 30,     September 30,

2012

2011

2012

2011

 
Revenues $533,806 $556,053 $1,628,946 $1,438,250
Cost of revenues (exclusive of items shown separately below) 372,940 386,518 1,140,878 1,006,849
Selling, general and administrative expenses 60,339 65,704 197,892 178,752
Accretion of environmental liabilities 2,488 2,435 7,409 7,231
Depreciation and amortization 41,300 34,604 116,794 87,000
Income from operations 56,739 66,792 165,973 158,418
Other (expense) income (91) 164 (465) 5,931
Loss on early extinguishment of debt (26,385) (26,385)
Interest (expense), net (11,596) (10,927) (33,836) (28,047)
Income before provision for income taxes 18,667 56,029 105,287 136,302
Provision for income taxes 6,308 18,896 37,487 47,283
Net income $12,359 $37,133 $67,800 $89,019
Earnings per share:
Basic $0.23 $0.70 $1.27 $1.68
Diluted $0.23 $0.70 $1.27 $1.67
 
Weighted average common shares outstanding 53,374 53,023 53,303 52,921

Weighted average common shares outstanding plus potentially dilutive common shares

53,565 53,370 53,519 53,298
 
CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(in thousands)
    September 30,     December 31,

2012

2011

Current assets:
Cash and cash equivalents $ 523,614 $ 260,723
Marketable securities 11,113 111
Accounts receivable, net 399,362 449,553
Unbilled accounts receivable 34,401 29,385
Deferred costs 6,995 5,903
Prepaid expenses and other current assets 53,252 73,349
Supplies inventories 63,934 56,242
Deferred tax assets   16,617   16,602
Total current assets   1,109,288   891,868
 
Property, plant and equipment, net   1,003,414   903,947

Other assets:

Long-term investments

4,326 4,245
Deferred financing costs 12,530 13,607
Goodwill 157,724 122,392
Permits and other intangibles, net 151,810 139,644
Other   10,311   10,100
Total other assets   336,701   289,988
Total assets $ 2,449,403 $ 2,085,803
 
CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS’ EQUITY

(in thousands)
   

September 30,

    December 31,

2012

2011

Current liabilities:
Current portion of capital lease obligations $ 5,937 $ 8,310
Accounts payable 174,327 178,084
Deferred revenue 29,060 32,297
Accrued expenses 136,687 147,992
Current portion of closure, post-closure and remedial liabilities   19,552   15,059
Total current liabilities   365,563   381,742
Other liabilities:
Closure and post-closure liabilities, less current portion 29,712 30,996
Remedial liabilities, less current portion 117,981 124,146
Long-term obligations 800,000 524,203
Capital lease obligations, less current portion 3,477 6,375
Unrecognized tax benefits and other long-term liabilities   125,915   117,354
Total other liabilities   1,077,085   803,074
Total stockholders’ equity, net   1,006,755   900,987
Total liabilities and stockholders’ equity $ 2,449,403 $ 2,085,803
 

Supplemental Segment Data (in thousands)

   

For the three months ended:

    For the nine months ended:
Revenue

September 30,
2012

   

September 30,
2011

September 30,
2012

   

September 30,
2011

       
Technical Services $242,106 $228,358 $698,853 $650,368
Field Services 57,663 99,520 164,248 203,098
Industrial Services 144,521 123,468 438,888 344,317
Oil & Gas Field Services 89,915 105,014 327,120 241,412
Corporate Items (399)     (307) (163)     (945)
Total $533,806     $556,053 $1,628,946     $1,438,250
 

Non-GAAP Results

Clean Harbors reports EBITDA results, which are non-GAAP financial measures, 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 EBITDA achieved. The Company defines EBITDA in accordance with its existing credit agreement.

    For the three months ended:     For the nine months ended:
EBITDA

September 30,
2012

   

September 30,
2011

September 30,
2012

   

September 30,
2011

       
Technical Services $67,332 $62,531 $184,874 $174,033
Field Services 5,707 19,318 15,599 31,527
Industrial Services 37,860 25,933 107,452 77,630
Oil & Gas Field Services 14,752 25,062 60,961 45,748
Corporate Items (25,124)     (29,013) (78,710)     (76,289)
Total $100,527     $103,831 $290,176     $252,649

Contacts

Clean Harbors, Inc.
James M. Rutledge, 781-792-5100
Vice Chairman, President and Chief Operating Officer
InvestorRelations@cleanharbors.com
or
Sharon Merrill Associates
Jim Buckley, 617-542-5300
Executive Vice President
clh@investorrelations.com

Release Summary

Clean Harbors, Inc. (NYSE: CLH), the leading provider of environmental, energy and industrial services throughout North America, today announced financial results for the third quarter of 2012.

Contacts

Clean Harbors, Inc.
James M. Rutledge, 781-792-5100
Vice Chairman, President and Chief Operating Officer
InvestorRelations@cleanharbors.com
or
Sharon Merrill Associates
Jim Buckley, 617-542-5300
Executive Vice President
clh@investorrelations.com