Clean Harbors Reports Second-Quarter 2016 Financial Results
- Reports Revenues of $697.5 Million, Reflecting Softness in Energy and Industrial Markets
- Announces Net Income of $4.0 Million and GAAP EPS of $0.07; Adjusted EPS of $0.15
- Reports Adjusted EBITDA of $110.4 Million; Margin of 15.8%
- Nears Completion of ~$175 Million in Acquisitions to Expand Environmental Services and Support
Safety-Kleen’s Closed Loop Offering
- Announces Planned Divestiture of Subsidiary Within Industrial Services
- Narrows 2016 Adjusted EBITDA Guidance Range
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 second quarter ended June 30, 2016.
Revenues for the second quarter of 2016 were $697.5 million, compared with $936.2 million in the same period a year ago.
Revenues in the second quarter of 2015 included approximately $170 million related to substantial emergency response activity.
Income from operations was $34.5 million in the second quarter of 2016, compared with $60.8 million in last year’s second quarter,
which included a non-cash goodwill impairment charge of $32.0 million related to the Oil and Gas Field Services segment.
Net income for the second quarter of 2016 was $4.0 million, or $0.07 per diluted share, which was negatively impacted by not
recognizing income tax benefits associated with pre-tax losses generated by certain of the Company’s Canadian subsidiaries. The
negative effect from not recognizing these benefits, which had no cash impact in the current period, was $4.5 million, or $0.08 per
diluted share. Adjusted net income, which includes the recognition of these tax benefits, was $8.4 million, or $0.15 per diluted
share.
In the second quarter of 2015, net income was $10.4 million, or $0.18 per diluted share, which included the non-cash goodwill
impairment charge. Excluding the non-cash impairment charge, second-quarter 2015 adjusted net income was $42.4 million, or $0.72
per diluted share.
Net income and adjusted net income results for the second quarters of 2016 and 2015 included pre-tax integration and severance
costs of $3.2 million and $1.8 million, respectively.
Adjusted EBITDA (see description below) in the second quarter of 2016 was $110.4 million, compared with $163.1 million in the
same period of 2015.
Comments on the Second Quarter
“The ongoing slowdown in the energy sector, combined with softness across several of our key industrial markets, limited growth
opportunities, constrained customer spending on projects and reduced near-term waste volumes from several key verticals,” said Alan
S. McKim, Chairman and Chief Executive Officer. “At the same time, both of our Safety-Kleen segments delivered strong quarterly
results, with SK Environmental Services increasing its year-over-year profitability for the eighth consecutive quarter and Kleen
Performance Products posting a small rebound in base oil pricing from earlier in the year, as well as an increase in blended
products sales.
“Within Technical Services, second-quarter incineration utilization was 88 percent due to a higher number of turnaround days,
which increased our deferred revenue by nearly $7 million sequentially to more than $70 million. Lower industrial volumes limited
project opportunities and reductions in oil and gas production waste streams drove landfill volumes down 21 percent from those of a
year ago,” McKim said. “Our Industrial and Field Services results reflected a difficult quarter in which our declining business in
Western Canada was further weakened by the massive fire in the Fort McMurray area forcing shutdowns, and customer activity in the
southwestern U.S. was temporarily reduced following widespread flooding in Texas. Business in our planned carve-out segments – Oil
and Gas Field Services and Lodging Services – was hurt by continued deterioration in the overall energy market, to which we
responded with additional cost-cutting efforts.
Recent Acquisitions and Divestiture
“During the second quarter, we worked on completing a series of six acquisitions totaling approximately $175 million, which
expanded our geographic footprint and capabilities. This included two Part B permits to support our growing presence on the West
Coast. One in southern California, where we were capacity constrained, is part of a significant plant, which will link with our new
El Dorado, Arkansas incinerator. The second is in Seattle where we acquired new capabilities for our Technical Services and Field
Services businesses in the Northwest region. We also acquired assets to support our North American renewable lubricants program and
this included terminals, re-refineries, waste oil collection and blending/packaging capabilities – all critical components to the
success of our ‘closed loop’ initiative, in which we directly sell Safety-Kleen’s blended products back to our customers. Three
acquisitions have already been finalized, and we expect the remaining three to close within the next week.
“In addition, we plan to divest a subsidiary in our Industrial Services group. This business, which generated approximately $55
million in revenues in 2015, is not a core line of business in our portfolio and was planned for divestiture. Proceeds are expected
to be in the range of $50 million.
Business Outlook and Financial Guidance
“Looking ahead, we see near-term challenges stemming from ongoing energy, industrial and customer spending trends. Consequently,
we intend to channel our resources and investments to core areas that show the highest growth potential, such as our closed loop
program and our new hazardous waste incinerator in Arkansas, which we expect will be operational by year-end. We also intend to
increase our previously announced $100 million cost reduction program to improve profitability and expand margins.
“As we enter the second half of 2016, we anticipate an improvement in our incineration business, due to our backlog of waste and
fewer planned turnaround days. We expect a significant sequential benefit from pricing gains in the base oil marketplace and we
expect that Kleen Performance Products will, in the third quarter, more than double its profitability compared with its
second-quarter profitability. We also should see a greater impact from our ongoing cost reduction efforts in the second half of the
year as more initiatives are fully implemented. As a result, we expect sequential improvement in Adjusted EBITDA in the third
quarter versus our second-quarter performance. On a year-over-year basis, however, we expect Adjusted EBITDA to be down
approximately 20 percent from the third quarter of 2015, reflecting last year’s record emergency response activities,” McKim
concluded.
Based on its year-to-date financial performance and current market conditions, Clean Harbors updated its 2016 annual Adjusted
EBITDA guidance. The Company narrowed its guidance to a range of $430 million to $450 million from its previously announced
guidance of $430 million to $490 million. On a GAAP basis, the Company's guidance is based on 2016 net income in the range of $4
million to $9 million. Adjusted net income for 2016, which includes the recognition of the non-cash tax benefits in Canada, is in
the range of $24 million to $29 million. A reconciliation of the Company’s Adjusted EBITDA guidance and adjusted net income to net
income guidance is included below.
Non-GAAP Results
Clean Harbors reports Adjusted EBITDA results, 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. 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 and the fact that management routinely evaluates the performance
of its businesses based upon levels of Adjusted EBITDA. The Company defines Adjusted EBITDA consistently and 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 three and six months ended June 30, 2016 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
For the Three Months Ended: |
|
For the Six Months Ended: |
|
|
|
June 30, 2016 |
|
June 30, 2015 |
|
June 30, 2016 |
|
June 30, 2015 |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
|
$3,966 |
|
$10,395 |
|
($16,905)
|
|
$3,306 |
| Accretion of environmental liabilities |
|
|
2,548 |
|
2,599 |
|
5,053 |
|
5,218 |
| Depreciation and amortization |
|
|
73,393 |
|
67,773 |
|
142,295 |
|
136,129 |
| Goodwill impairment charge |
|
|
— |
|
31,992 |
|
— |
|
31,992 |
| Other expense |
|
|
189 |
|
660 |
|
539 |
|
251 |
| Interest expense, net |
|
|
21,647 |
|
19,249 |
|
40,627 |
|
38,687 |
| Provision for income taxes |
|
|
8,702 |
|
30,454 |
|
6,156 |
|
25,816 |
| Adjusted EBITDA |
|
|
$110,445 |
|
$163,122 |
|
$177,765 |
|
$241,399 |
|
|
|
|
|
|
|
|
|
|
This press release includes a discussion of net income (loss) and net earnings (loss) per share adjusted for the non-cash impact
of unbenefited tax losses in Canada and income from operations, net income (loss) and earnings (loss) 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 (loss) to adjusted net income (loss) and earnings
(loss) per share to adjusted earnings (loss) per share for the three and six months ended June 30, 2016 and 2015 (in thousands,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended: |
|
For the Six Months Ended: |
|
|
|
June 30, 2016
|
|
June 30, 2015
|
|
June 30, 2016
|
|
June 30, 2015
|
| Adjusted income from operations |
|
|
|
|
|
|
|
|
|
| Income from operations |
|
|
$34,504 |
|
$60,758 |
|
$30,417 |
|
$68,060 |
|
Goodwill impairment charge
|
|
|
— |
|
31,992 |
|
— |
|
31,992 |
| Adjusted income from operations |
|
|
$34,504 |
|
$92,750 |
|
$30,417 |
|
$100,052 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income (loss)
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
|
$3,966 |
|
$10,395 |
|
($16,905)
|
|
$3,306 |
| Unbenefited tax losses |
|
|
4,453 |
|
— |
|
12,371 |
|
— |
| Goodwill impairment charge, net of $0 taxes |
|
|
— |
|
31,992 |
|
— |
|
31,992 |
| Adjusted net income (loss) |
|
|
$8,419 |
|
$42,387 |
|
($4,534)
|
|
$35,298 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
| Earnings (loss) per share |
|
|
$0.07 |
|
$0.18 |
|
($0.29)
|
|
$0.06 |
| Unbenefited tax losses |
|
|
0.08 |
|
— |
|
0.21 |
|
— |
|
Goodwill impairment charge, net of $0 taxes
|
|
|
— |
|
0.54 |
|
— |
|
0.54 |
| Adjusted earnings (loss) per share |
|
|
$0.15 |
|
$0.72 |
|
($0.08)
|
|
$0.60 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Guidance Reconciliation
An itemized reconciliation between projected net income and projected Adjusted EBITDA is as follows:
|
|
|
|
|
|
|
For the Year Ending
December 31, 2016
|
|
|
|
Amount |
|
|
|
(In millions) |
| Projected GAAP net income |
|
|
$4 |
|
to |
$9 |
| Adjustments: |
|
|
|
|
|
|
| Accretion of environmental liabilities |
|
|
|
11 |
|
to |
|
10 |
| Depreciation and amortization |
|
|
|
295 |
|
to |
|
285 |
| Interest expense, net |
|
|
|
84 |
|
to |
|
84 |
| Provision for income taxes |
|
|
|
36 |
|
to |
|
62 |
| Projected Adjusted EBITDA |
|
|
$430 |
|
to |
$450 |
|
|
|
|
|
|
|
An itemized reconciliation between projected net income and projected adjusted net income is as follows:
|
|
|
|
|
|
|
For the Year Ending
December 31, 2016
|
|
|
|
Amount |
|
|
|
(In millions) |
| Projected GAAP net income |
|
|
$4 |
to |
$9 |
|
Unbenefited tax losses
|
|
|
|
20 |
to |
|
20 |
|
Projected adjusted net income
|
|
|
$24 |
to |
$29 |
|
|
|
|
|
|
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 OPERATIONS
|
|
(in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended: |
|
For the Six Months Ended: |
|
|
June 30, 2016 |
|
June 30, 2015 |
|
June 30, 2016 |
|
June 30, 2015 |
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
|
$697,510 |
|
$936,228 |
|
$1,333,593 |
|
$1,668,727 |
| Cost of revenues (exclusive of items shown separately below) |
|
|
480,002 |
|
652,688 |
|
944,281 |
|
1,199,195 |
| Selling, general and administrative expenses |
|
|
107,063 |
|
120,418 |
|
211,547 |
|
228,133 |
| Accretion of environmental liabilities |
|
|
2,548 |
|
2,599 |
|
5,053 |
|
5,218 |
| Depreciation and amortization |
|
|
73,393 |
|
67,773 |
|
142,295 |
|
136,129 |
| Goodwill impairment charge |
|
|
— |
|
31,992 |
|
— |
|
31,992 |
| Income from operations |
|
|
34,504 |
|
60,758 |
|
30,417 |
|
68,060 |
| Other expense |
|
|
(189) |
|
(660) |
|
(539) |
|
(251) |
| Interest expense, net |
|
|
(21,647) |
|
(19,249) |
|
(40,627) |
|
(38,687) |
| Income (loss) before provision for income taxes |
|
|
12,668 |
|
40,849 |
|
(10,749) |
|
29,122 |
| Provision for income taxes |
|
|
8,702 |
|
30,454 |
|
6,156 |
|
25,816 |
| Net income (loss) |
|
|
$3,966 |
|
$10,395 |
|
($16,905)
|
|
$3,306 |
| Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
| Basic |
|
|
$0.07 |
|
$0.18 |
|
($0.29)
|
|
$0.06 |
| Diluted |
|
|
$0.07 |
|
$0.18 |
|
($0.29)
|
|
$0.06 |
|
|
|
|
|
|
|
|
|
|
| Shares used to compute earnings (loss) per share — Basic |
|
|
57,549 |
|
58,590 |
|
57,599 |
|
58,732 |
| Shares used to compute earnings (loss) per share — Diluted |
|
|
57,678 |
|
58,710 |
|
57,599 |
|
58,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLEAN HARBORS, INC. AND SUBSIDIARIES
|
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
June 30, 2016 |
|
December 31, 2015 |
| Current assets: |
|
|
|
|
|
| Cash and cash equivalents |
|
|
$352,923 |
|
$184,708 |
| Accounts receivable, net |
|
|
503,749 |
|
496,004 |
| Unbilled accounts receivable |
|
|
29,119 |
|
25,940 |
| Deferred costs |
|
|
21,261 |
|
18,758 |
| Inventories and supplies |
|
|
162,404 |
|
149,521 |
| Prepaid expenses and other current assets |
|
|
49,678 |
|
46,265 |
| Total current assets |
|
|
1,119,134 |
|
921,196 |
| Property, plant and equipment, net |
|
|
1,594,987 |
|
1,532,467 |
| Other assets: |
|
|
|
|
|
| Deferred financing costs |
|
|
1,412 |
|
1,847 |
| Goodwill |
|
|
461,491 |
|
453,105 |
| Permits and other intangibles, net |
|
|
492,224 |
|
506,818 |
| Other |
|
|
23,133 |
|
15,995 |
| Total other assets |
|
|
978,260 |
|
977,765 |
| Total assets |
|
|
$3,692,381 |
|
$3,431,428 |
| Current liabilities: |
|
|
|
|
|
| Accounts payable |
|
|
$222,302 |
|
$241,183 |
| Deferred revenue |
|
|
70,263 |
|
61,882 |
| Accrued expenses |
|
|
203,813 |
|
193,660 |
| Current portion of closure, post-closure and remedial liabilities |
|
|
24,043 |
|
20,395 |
| Total current liabilities |
|
|
520,421 |
|
517,120 |
| Other liabilities: |
|
|
|
|
|
| Closure and post-closure liabilities, less current portion |
|
|
51,143 |
|
49,020 |
| Remedial liabilities, less current portion |
|
|
114,291 |
|
118,826 |
| Long-term obligations |
|
|
1,631,881 |
|
1,382,543 |
| Deferred taxes, unrecognized tax benefits and other long-term
liabilities |
|
|
258,302 |
|
267,637 |
| Total other liabilities |
|
|
2,055,617 |
|
1,818,026 |
| Total stockholders’ equity, net |
|
|
1,116,343 |
|
1,096,282 |
| Total liabilities and stockholders’ equity |
|
|
$3,692,381 |
|
$3,431,428 |
|
|
|
|
|
Supplemental Segment Data (in thousands)
|
|
|
|
|
|
|
|
For the Three Months Ended: |
| Revenue |
|
|
June 30, 2016 |
|
June 30, 2015 |
|
|
|
Third Party
Revenues
|
|
Intersegment
Revenues
(Expense), net
|
|
Direct
Revenues
|
|
Third Party
Revenues
|
|
Intersegment
Revenues
(Expense), net
|
|
Direct
Revenues
|
| Technical Services |
|
|
$229,130 |
|
$36,245 |
|
$265,375 |
|
$248,025 |
|
$39,397 |
|
$287,422 |
| Industrial and Field Services |
|
|
|
153,851 |
|
|
(9,341) |
|
|
144,510 |
|
|
353,329 |
|
|
(11,631) |
|
|
341,698 |
| Kleen Performance Products |
|
|
|
86,711 |
|
|
(7,600) |
|
|
79,111 |
|
|
99,104 |
|
|
(21,429) |
|
|
77,675 |
| SK Environmental Services |
|
|
|
191,004 |
|
|
(21,491) |
|
|
169,513 |
|
|
175,876 |
|
|
(8,799) |
|
|
167,077 |
| Lodging Services |
|
|
|
16,418 |
|
|
151 |
|
|
16,569 |
|
|
21,171 |
|
|
1,072 |
|
|
22,243 |
| Oil and Gas Field Services |
|
|
|
19,232 |
|
|
2,480 |
|
|
21,712 |
|
|
38,617 |
|
|
2,194 |
|
|
40,811 |
| Corporate Items |
|
|
|
1,164 |
|
|
(444) |
|
|
720 |
|
|
106 |
|
|
(804) |
|
|
(698) |
| Total |
|
|
$697,510 |
|
$— |
|
|
$697,510
|
|
$936,228 |
|
$— |
|
|
$936,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended: |
| Revenue |
|
|
June 30, 2016 |
|
June 30, 2015 |
|
|
|
Third Party
Revenues
|
|
Intersegment
Revenues
(Expense), net
|
|
Direct
Revenues
|
|
Third Party
Revenues
|
|
Intersegment
Revenues
(Expense), net
|
|
Direct
Revenues
|
| Technical Services |
|
|
$448,235 |
|
$71,477 |
|
$519,712 |
|
$488,350 |
|
$75,598 |
|
$563,948 |
| Industrial and Field Services |
|
|
|
275,428 |
|
|
(16,824) |
|
|
258,604 |
|
|
500,197 |
|
|
(18,114) |
|
|
482,083 |
| Kleen Performance Products |
|
|
|
154,254 |
|
|
(17,008) |
|
|
137,246 |
|
|
195,911 |
|
|
(39,687) |
|
|
156,224 |
| SK Environmental Services |
|
|
|
370,422 |
|
|
(40,238) |
|
|
330,184 |
|
|
336,560 |
|
|
(20,381) |
|
|
316,179 |
| Lodging Services |
|
|
|
32,063 |
|
|
436 |
|
|
32,499 |
|
|
55,275 |
|
|
1,253 |
|
|
56,528 |
| Oil and Gas Field Services |
|
|
|
51,248 |
|
|
3,446 |
|
|
54,694 |
|
|
92,204 |
|
|
3,535 |
|
|
95,739 |
| Corporate Items |
|
|
|
1,943 |
|
|
(1,289) |
|
|
654 |
|
|
230 |
|
|
(2,204) |
|
|
(1,974) |
| Total |
|
|
$1,333,593 |
|
$— |
|
$ |
1,333,593 |
|
|
$1,668,727
|
|
$— |
|
$ |
1,668,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended: |
|
For the Six Months Ended: |
| Adjusted EBITDA |
|
|
June 30, 2016 |
|
June 30, 2015 |
|
June 30, 2016 |
|
June 30, 2015 |
|
|
|
|
|
|
|
|
|
|
| Technical Services |
|
|
$68,891 |
|
$76,808 |
|
$129,289 |
|
$140,209 |
| Industrial and Field Services |
|
|
19,946 |
|
73,081 |
|
22,064 |
|
83,390 |
| Kleen Performance Products |
|
|
9,995 |
|
15,824 |
|
14,555 |
|
11,348 |
| SK Environmental Services |
|
|
45,239 |
|
41,195 |
|
80,734 |
|
68,444 |
| Lodging Services |
|
|
3,022 |
|
3,852 |
|
4,041 |
|
10,762 |
| Oil and Gas Field Services |
|
|
(4,207) |
|
(2,182) |
|
(5,601) |
|
(779) |
| Corporate Items |
|
|
(32,441) |
|
(45,456) |
|
(67,317) |
|
(71,975) |
| Total |
|
|
$110,445 |
|
$163,122 |
|
$177,765 |
|
$241,399 |
|
|
|
|
|
|
|
|
|
|
Clean Harbors, Inc.
Investors:
Jim Buckley, 781-792-5100
SVP Investor Relations
Buckley.James@cleanharbors.com
or
Media:
Eric Kraus, 781-792-5100
EVP Corporate Communications & Public Affairs
Kraus.Eric@cleanharbors.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20160803005826/en/