Clean Harbors Announces Second-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 second quarter ended June 30, 2019.

“We delivered a strong second-quarter performance and extended our positive momentum with our seventh consecutive quarter of profitable growth,” said Alan S. McKim, Chairman, President and Chief Executive Officer. “We generated 2% top-line growth in the quarter with a corresponding 7% increase in Adjusted EBITDA. As a result, our Adjusted EBITDA (see description below) margin grew by 80 basis points from a year ago to 17.2%, which represents our highest margin in nearly three years. We experienced strong contributions to profitability from both our Environmental Services and Safety-Kleen segments.”

Second-quarter revenues increased to $868.7 million from $849.1 million in the same period of 2018. Income from operations grew 14% to $73.0 million from $64.4 million in the year-earlier quarter.

Net income for the second quarter of 2019 was $36.2 million, or $0.65 per diluted share. This compares with net income for the same period in 2018 of $30.7 million, or $0.54 per diluted share. Adjusted for certain items in both periods, adjusted net income was $36.9 million, or $0.66 per diluted share, for the second quarter of 2019 compared with adjusted net income of $30.8 million, or $0.54 per diluted share, in the same period of 2018. (See reconciliation table below)

Adjusted EBITDA in the second quarter of 2019 increased 7% to $149.8 million from $139.6 million in the same period of 2018.

“In our Environmental Services segment, Adjusted EBITDA increased 8% on modest top-line growth, resulting in a 120-basis-point margin improvement,” McKim said. “This sizable growth in margins reflected higher pricing in our disposal network along with a better mix of high-value waste streams. Incineration utilization was 82% for the quarter, down from a year ago, mostly due to a heavy schedule of turnaround days. More than offsetting that decline in utilization was a 15% increase in our average price per pound year-over-year, as we continued to focus on driving higher-margin volumes into our network. This segment also benefitted from cost-reduction initiatives and operational efficiencies.

“Within our Safety-Kleen segment, revenue increased 4% through growth in a majority of our core branch offerings, pricing initiatives and higher production levels at our re-refineries,” McKim said. “On the strength of productivity gains and streamlining operations, we improved Q2 margins in Safety-Kleen to 26% with Adjusted EBITDA for the segment increasing 9%. Waste oil collection remained strong at 63 million gallons and we achieved an average charge-for-oil basis for those volumes.”

Business Outlook and Financial Guidance

“We enter the second half of 2019 with continued confidence about our prospects for profitable growth for the full year,” McKim said. “Our optimistic outlook is derived from a combination of positive industry trends, momentum in several of our key businesses and ongoing Company initiatives. Within Environmental Services, we have a strong backlog of waste in our collection network and anticipate a lower number of incineration down days in the back half of the year compared with the first six months. We continue to see opportunities for high-value waste streams due to activities within U.S. chemical and manufacturing sectors, and we have some large projects kicking off in the third quarter. Our industrial, field and energy-related service businesses are all contributing to the year-over-year performance improvement in that segment.

“Within Safety-Kleen, our branch network remains a reliable source of steady growth in its core offerings,” McKim said. “In the second quarter, Safety-Kleen Oil rebounded from a challenging start to the year, and we expect that momentum to continue in the back half of 2019. Our re-refineries are running well and are on track to achieve our targeted base oil production of more than 150 million gallons this year. In light of the potential positive impact of IMO 2020, we plan to have our plants running at record output levels by year-end.

“Given the favorable near-term outlook for both our Environmental Services and Safety-Kleen segments, we expect Adjusted EBITDA in both the third and fourth quarters of 2019 to grow in the mid- to high-single digit range compared with prior-year periods. Overall, we continue to anticipate a strong year of profitable growth and margin expansion driven by pricing, mix, cross-selling and increased efficiencies,” McKim concluded.

Based on its year-to-date financial performance and current market conditions, Clean Harbors raised its guidance range and currently expects full-year 2019 Adjusted EBITDA in the range of $520 million to $550 million. On a GAAP basis, the Company’s guidance is based on anticipated 2019 net income in the range of $82 million to $115 million. Clean Harbors also raised the low end of its guidance range for adjusted free cash flow and currently expects 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 six months ended June 30, 2019 and 2018 (in thousands):

This press release includes a discussion of net income and earnings 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 to adjusted net income, and earnings per share to adjusted earnings per share for the three and six months ended June 30, 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 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):

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,” “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.

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