Clean Harbors Reports Fourth-Quarter and Year-End 2014 Financial Results

  • Announces Q4 Revenue of $845.0 Million, EPS of $0.46 and Adjusted EBITDA of $130.8 Million
  • Generates Full-Year Revenue of $3.4 Billion and Adjusted EBITDA of $521.9 Million
  • Offsets Slowdown Related to Energy Markets through Environmental Business Performance
  • Confirms 2015 Adjusted EBITDA 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 fourth quarter and year ended December 31, 2014.

Revenues for the fourth quarter were $845.0 million, compared with $879.4 million in the same period of 2013. Income from operations in the fourth quarter of 2014 was $57.5 million, compared with $58.9 million in the same period of 2013.

Fourth-quarter 2014 net income was $27.4 million, or $0.46 per diluted share, compared with net income of $26.8 million, or $0.44 per diluted share, in the same period of 2013. Net income for the fourth quarter of 2014 and 2013 included pre-tax integration and severance costs of $0.5 million and $2.2 million, respectively.

Adjusted EBITDA (see description below) in the fourth quarter of 2014 was $130.8 million, compared with $129.3 million in the same period of 2013. The Company purchased $50.5 million of Clean Harbors stock as part of its share repurchase program during the fourth quarter.

Comments on the Fourth Quarter

“We concluded 2014 with a strong fourth-quarter performance, particularly in light of numerous headwinds affecting the energy markets,” said Alan S. McKim, Chairman and Chief Executive Officer. “Q4 Adjusted EBITDA was above our guidance range. Revenue, while lower mostly due to the effect of currency translation, was in line with our expectations. From a margin perspective, cost reduction initiatives and a stronger business mix drove an 80-basis-point improvement in Adjusted EBITDA from the fourth quarter of last year. This increase underscores the significant leverage within our network of disposal facilities and the cross-selling we are deriving from Safety-Kleen.

“Our Technical Services segment posted an exceptional quarter, with incineration utilization of 96% and landfill volumes at the highest quarterly level in our history, up 37% from the prior year. As a result, we grew Adjusted EBITDA in the segment by 23% in the quarter on 7% revenue growth, while margins reached 29.6%. SK Environmental Services continued its consistent performance with another quarter of increased profitability and improved margins. Our Industrial and Field Services segment delivered revenue growth in the quarter, primarily as a result of a 16% revenue increase in our Field Services business, which continues to benefit from collaboration with Safety-Kleen. Results in our Oil Re-refining and Recycling segment reflect the year-over-year decline in base oil pricing. Lastly, our Oil and Gas Field Services and Lodging Services segments underperformed in the quarter, largely because of margin pressures and the challenging sales environment brought on by the dynamics of the current energy market.”

Full-Year 2014 Results

Revenues for 2014 were $3.40 billion compared with $3.51 billion in 2013. Net loss for 2014, which included a $123.4 million non-cash, pre-tax goodwill impairment charge, was $28.3 million, or $0.47 per share, compared with net income of $95.6 million, or $1.57 per diluted share, in 2013. Excluding the impairment charge, adjusted net income for 2014 was $92.4 million, or $1.53 per diluted share. 2014 net loss also included $11.1 million of pre-tax integration and severance costs. 2013 net income included $17.5 million in pre-tax integration and severance costs, and $13.6 million in pre-tax adjustments related to acquisition accounting. Adjusted EBITDA (see description below) increased to $521.9 million in 2014 from $510.1 million for 2013.

“In 2014, we encountered several headwinds that included declining Canadian currency, a slowdown in the Oil Sands, a drop in base oil prices and turbulence in the energy markets. We took aggressive action and responded decisively to each of these issues by implementing a $75 million cost reduction plan, creating a regional sales structure, introducing our Zero-Pay and Charge-for-Oil initiative toward year-end and conducting a strategic review of our portfolio that resulted in a planned carve out of our Oil and Gas Field Services business,” McKim said. “Ultimately, we were successful in growing our Adjusted EBITDA from the prior year despite these significant market challenges, as we drove record volumes into our disposal network. Our margin expansion and growth in profitability in 2014 were the direct results of the outstanding team we have at Clean Harbors. Our team’s commitment to service excellence and safety remains a critical element in our success. In 2014, we again improved our key safety metrics, benefitting our employees, our customers and the communities we serve.”

Business Outlook and Financial Guidance

“We enter 2015 with operational and sales momentum in our environmental-related businesses, while still facing external headwinds across several segments,” McKim said. “Activity in the Oil Sands region remains weak, limiting opportunities and creating pricing pressure for our Lodging Services segment. Our Oil and Gas Field Services segment also is experiencing margin pressure as it operates in an environment of reduced exploration budgets and significantly lower rig counts in both the U.S. and Canada. However, we anticipate ongoing strength in Technical Services as we continue to drive substantial volumes into our disposal network, particularly from Safety-Kleen. Within SK Environmental Services, we see organic growth opportunities, including new branch locations and cross-selling with our Field Services team. Our Industrial Services business is poised for a year of increased turnaround services to our clients and sees a solid pipeline of project activity in the U.S. Within our Oil Re-refining and Recycling segment, we will continue to address the spread compression we have experienced in that business. In addition, we are implementing additional expense reductions in areas such as procurement, branch consolidations and non-billable headcount, which will further drive down our cost structure. We expect to see our margins continue to improve in 2015, even with the challenges we are facing in oil-related markets.”

Based on its 2014 financial performance and current market conditions, Clean Harbors is reiterating its previously announced 2015 annual Adjusted EBITDA guidance. The Company continues to anticipate Adjusted EBITDA in the 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 first quarter of 2015, the Company expects to generate Adjusted EBITDA in the range of $83 million to $90 million.

Clean Harbors reports Adjusted EBITDA, 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 (loss) and Adjusted EBITDA for the fourth quarter and full year of 2014 and 2013 (in thousands):

               
For the Three Months Ended: For the Year Ended:

December 31,
2014

     

December 31,
2013

December 31,
2014

     

December 31,
2013

 
Net income (loss) $27,377 $26,801 $(28,328) $95,566
Accretion of environmental liabilities 2,637 2,913 10,612 11,541
Depreciation and amortization 70,603 67,545 276,083 264,449
Goodwill impairment charge 123,414
Other (income) expense (244) 325 (4,380) (1,705)
Interest expense, net 19,238 19,592 77,668 78,376
Pre-tax, non-cash acquisition accounting inventory adjustment 13,559
Provision for income taxes 11,166 12,159 66,850 48,319
Adjusted EBITDA $130,777 $129,335 $521,919 $510,105
 

This press release includes a discussion of 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 net (loss) income to adjusted net income and (loss) earnings per share to adjusted earnings per share for the year ended December 31, 2014 and 2013 (in thousands):

  For the Year Ended:
Adjusted net income      

December 31,
2014

     

December 31,
2013

Net (loss) income $(28,328) $95,566
Goodwill impairment charge, net of tax 120,750
Adjusted net income $ 92,422 $95,566
 
Adjusted earnings per share
(Loss) earnings per share $(0.47) $1.57
Goodwill impairment charge, net of tax 2.00
Adjusted earnings per share $ 1.53 $1.57

Adjusted EBITDA Guidance Reconciliation

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

       

For the Quarter Ending
March 31, 2015

     

For the Year Ending
December 31, 2015

Amount Amount
(In millions) (In millions)

Projected GAAP net (loss) income

$(4)

to

$ 2

 

$103 to $136
Adjustments:
Accretion of environmental liabilities 3 to 3 11 to 10
Depreciation and amortization 68 to 65 275 to 265
Interest expense, net 19 to 19 76 to 76

(Benefit) provision for income taxes

(3)

to

1

65 to 83
Projected Adjusted EBITDA

$83

to

$90

$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 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 (LOSS)
(in thousands except per share amounts)

 

        For the Three Months Ended:       For the Year Ended:

December 31,
2014

     

December 31,
2013

December 31,
2014

     

December 31,
2013

 
Revenues $ 845,024 $ 879,430 $ 3,401,636 $ 3,509,656
Cost of revenues (exclusive of items shown separately below) 610,720 645,164 2,441,796 2,542,633
Selling, general and administrative expenses 103,527 104,931 437,921 470,477
Accretion of environmental liabilities 2,637 2,913 10,612 11,541
Depreciation and amortization 70,603 67,545 276,083 264,449
Goodwill impairment charge           123,414      
Income from operations 57,537 58,877 111,810 220,556
Other income (expense) 244 (325 ) 4,380 1,705
Interest expense, net   (19,238 )   (19,592 )   (77,668 )   (78,376 )
Income before provision for income taxes 38,543 38,960 38,522 143,885
Provision for income taxes   11,166     12,159     66,850     48,319  
Net income (loss) $ 27,377   $ 26,801   $ (28,328 ) $ 95,566  
Earnings (loss) per share:
Basic $ 0.46   $ 0.44   $ (0.47 ) $ 1.58  
Diluted $ 0.46   $ 0.44   $ (0.47 ) $ 1.57  
 
Shares used to compute earnings (loss) per share — Basic   59,491     60,671     60,311     60,574  
Shares used to compute earnings (loss) per share — Diluted   59,613     60,835     60,311     60,728  
 
CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
             
December 31, 2014 December 31, 2013
Current assets:
Cash and cash equivalents $ 246,879 $ 310,073
Marketable securities 12,435
Accounts receivable, net 557,131 579,394
Unbilled accounts receivable 40,775 26,568
Deferred costs 19,018 16,134
Inventories and supplies 168,663 152,096
Prepaid expenses and other current assets 57,435 41,962
Deferred tax assets   36,532   32,517
Total current assets   1,126,433   1,171,179
Property, plant and equipment, net   1,558,834   1,602,170
Other assets:
Deferred financing costs 17,580 20,860
Goodwill 452,669 570,960
Permits and other intangibles, net 530,080 569,973
Other   18,682   18,536
Total other assets 1,019,011 1,180,329
Total assets $ 3,704,278 $ 3,953,678
Current liabilities:
Current portion of capital lease obligations $ 536 $ 1,329
Accounts payable 267,329 316,462
Deferred revenue 62,966 55,454
Accrued expenses 219,549 236,829
Current portion of closure, post-closure and remedial liabilities   22,091   29,471
Total current liabilities 572,471 639,545
Other liabilities:
Closure and post-closure liabilities, less current portion 45,702 41,201
Remedial liabilities, less current portion 138,029 148,911
Long-term obligations 1,395,000 1,400,000
Capital lease obligations, less current portion 1,435
Deferred taxes, unrecognized tax benefits and other long-term liabilities   290,205   246,947
Total other liabilities 1,868,936 1,838,494
Total stockholders’ equity, net   1,262,871   1,475,639
Total liabilities and stockholders’ equity $ 3,704,278 $ 3,953,678
 

Supplemental Segment Data (in thousands)

 
        For the Three Months Ended:
Revenue December 31, 2014       December 31, 2013

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Technical Services $ 277,210 $ 42,499 $ 319,709 $ 264,260   $ 35,120   $ 299,380
Industrial and Field Services 171,083 (10,591 ) 160,492 164,848 (10,207 ) 154,641
Oil Re-refining and Recycling 120,305 (46,276 ) 74,029 133,610 (49,156 ) 84,454
SK Environmental Services 163,628 16,001 179,629 168,517 22,766 191,283
Lodging Services 36,070 471 36,541 52,959 857 53,816
Oil and Gas Field Services 76,870 744 77,614 95,371 934 96,305
Corporate Items   (142 )     (2,848 )     (2,990 )   (135 )     (314 )     (449 )
Total $ 845,024     $     $ 845,024   $ 879,430     $     $ 879,430  
 
 
For the Year Ended:
Revenue December 31, 2014 December 31, 2013

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Third Party
Revenues

 

Intersegment
Revenues
(Expense), net

 

Direct
Revenues

Technical Services $ 1,043,267 $ 162,116 $ 1,205,383 $ 1,023,926 $ 123,889 $ 1,147,815
Industrial and Field Services 681,779 (42,410 ) 639,369 708,523 (44,934 ) 663,589
Oil Re-refining and Recycling 533,587 (201,864 ) 331,723 528,636 (193,009 ) 335,627
SK Environmental Services 667,320 80,419 747,739 665,008 107,091 772,099
Lodging Services 172,218 2,514 174,732 208,545 3,840 212,385
Oil and Gas Field Services 303,189 5,081 308,270 383,959 6,546 390,505
Corporate Items (1)   276       (5,856 )     (5,580 )   (8,941 )     (3,423 )     (12,364 )
Total $ 3,401,636     $     $ 3,401,636   $ 3,509,656     $     $ 3,509,656  
 

(1) Corporate Items revenue for the year ended December 31, 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 year ended December 31, 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 (loss).

             
For the Three Months Ended: For the Year Ended:
Adjusted EBITDA

December 31,
2014

     

December 31,
2013

December 31,
2014

     

December 31,
2013

 
Technical Services $ 94,728 $ 77,236 $ 328,130 $ 285,520
Industrial and Field Services 20,200 21,523 87,591 96,804
Oil Re-refining and Recycling 2,309 10,253 51,561 57,003
SK Environmental Services 29,001 28,448 113,986 112,722
Lodging Services 12,242 17,088 61,438 80,358
Oil and Gas Field Services 12,426 15,397 40,114 67,855
Corporate Items   (40,129 )   (40,610 )   (160,901 )   (190,157 )
Total $ 130,777   $ 129,335   $ 521,919   $ 510,105  
 

Contacts

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

Release Summary

Norwell, Mass. – February 25, 2015 – Clean Harbors Inc. (CLH), leading provider of environmental, energy services announced financial results for fourth quarter and year ended December 31, 2014.

Contacts

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