Clean Harbors Announces First-Quarter 2019 Financial Results

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 first quarter ended March 31, 2019.

“We opened 2019 with a strong first-quarter performance,” said Alan S. McKim, Chairman, President and Chief Executive Officer. “We delivered 4% top-line growth and a corresponding 15% increase in Adjusted EBITDA. As a result, our Adjusted EBITDA margin grew by 120 basis points from the same period in 2018. The quarter’s profitable growth was driven by our Environmental Services segment, which more than offset a small year-over-year decline in our Safety-Kleen segment.”

First-quarter revenues increased to $780.8 million from $749.8 million in the same period of 2018. Income from operations more than doubled to $23.7 million from $11.0 million in the year-earlier quarter.

Net income for the first quarter of 2019 was $1.0 million, or $0.02 per diluted share. This compared with a net loss for the same period in 2018 of $12.6 million, or $0.22 per share. Adjusted for certain items in both periods, adjusted net income for the first quarter of 2019 was $5.1 million, or $0.09 per diluted share, compared with an adjusted net loss of $6.6 million, or $0.12 per share, in the same period in 2018. (See reconciliation table below)

Adjusted EBITDA (see description below) in the first quarter of 2019 increased 15% to $101.7 million from $88.3 million in the same period of 2018.

“Environmental Services generated top-line growth of 8%. This reflected the Veolia Industrial acquisition in early 2018 as well as organic growth, as we benefited from higher pricing and a better mix of waste streams,” McKim said. “Adjusted EBITDA in the segment grew 46%, reflecting pricing initiatives, cost reductions, productivity improvements and some one-time gains. The segment’s results are even more impressive given that our Deer Park incineration facility was closed for nearly two weeks due to a major fire at the neighboring chemical storage facility. As a result of that fire, as well as a high number of planned turnaround days, our incineration utilization was 77% in Q1. However, similar to recent quarters, we continued to improve our mix with many more high-value waste streams in our network, which drove our average incineration price per pound up by 14% from a year ago.

“Within Safety-Kleen Environmental Services, our branch business continued to perform well as we generated growth and increased pricing across our core lines of business. We increased our direct lubricant sales in the quarter as they accounted for 8% of gallons sold compared with 5% in Q1 a year ago,” McKim said. “The Safety-Kleen Oil business had several challenges in the first quarter. Lower base oil prices year-over-year and seasonal weakness in market demand were compounded by adverse weather conditions that limited our production and ability to transport in the quarter. Severe cold early in the quarter froze several waterways and rail lines in the Midwest that hindered our ability to barge or rail product, followed by widespread flooding that again affected shipping lanes and rail lines.”

Business Outlook and Financial Guidance

“Based on positive industry trends, the current economic environment and ongoing company initiatives, we are encouraged about our prospects for 2019,” McKim said. “In Environmental Services, the growth of the U.S. chemical and manufacturing sectors provide a strong tailwind that enhances our ability to drive more high value waste streams through our disposal facilities. Our project pipeline is as strong as ever, with numerous remediation and waste project opportunities. Our industrial and field services businesses should all contribute to another year of profitable growth in the segment.

“For Safety-Kleen Environmental Services, our branch network should help spur growth in our core offerings and direct lube sales program,” McKim said. “We expect Safety-Kleen Oil will rebound quickly following an uneven start to the year as we return to more normalized levels of production and sales following the weather-related slowdown. In addition, recent increases in base oil pricing should support spread expansion. We continue to target base oil production of more than 150 million gallons and total blended sales of 50 million gallons through growth in direct lube sales and our distributor business.

“Second-quarter 2019 Adjusted EBITDA is expected to grow slightly from the same period of 2018. Overall, we see indications of a favorable environment for key businesses in each segment, and anticipate a strong year of profitable growth and margin expansion driven by pricing, mix, cross-selling and increased efficiencies,” McKim concluded.

Based on its first-quarter financial performance and current market conditions, Clean Harbors raised the low end of its guidance range and now expects full-year 2019 Adjusted EBITDA in the range of $510 million to $540 million. On a GAAP basis, the Company’s guidance is based on anticipated 2019 net income in the range of $77 million to $110 million. For 2019, Clean Harbors continues to expect to generate adjusted free cash flow in the range of $190 million to $220 million, which is based on anticipated 2019 net cash from operating activities in the range of $380 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 (loss) 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 measurements 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 credit agreement, as described in the following reconciliation showing the differences between reported net income and Adjusted EBITDA for the three months ended March 31, 2019 and 2018 (in thousands):

This press release includes a discussion of net income (loss) and earnings (loss) per share adjusted for 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 (loss) to adjusted net income (loss), and earnings (loss) per share to adjusted earnings (loss) per share for the three months ended March 31, 2019 and 2018 (in thousands, except per share amounts):

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 our 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 measurements 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):

Adjusted EBITDA Guidance Reconciliation

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

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):

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,” 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.

Supplemental Segment Data (in thousands)

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