Market Overview

Clean Harbors Announces Second-Quarter 2018 Financial Results

  • Achieves 13% Increase in Q2 Revenues to $849.1 Million, Driven by
    Strong Organic Growth and Veolia Acquisition
  • Reports Net Income of $30.7 Million, or $0.54 per Diluted Share
  • Delivers Q2 Adjusted EBITDA of $139.6 Million, up 16% on Strong
    Waste Volumes, Industrial Turnarounds and Safety-Kleen Growth; Margins
    Increase by 40 Basis Points
  • Completes Debt Refinancing to Lower Annual Interest Expense and
    Extend the Maturity Date to 2024
  • Raises 2018 Adjusted EBITDA and Adjusted Free Cash Flow Guidance

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, 2018.

"We delivered strong second-quarter results, with significant top- and
bottom-line contributions from both of our segments," said Alan S.
McKim, Chairman, President and Chief Executive Officer. "Our quarterly
performance in Environmental Services was driven by higher volumes and
an improved mix in our disposal network, as well as better-than-expected
profitability from our Veolia Industrial Services acquisition.
Safety-Kleen continued to capitalize on the favorable pricing
environment for base oil and blended products in the quarter. Overall,
our second-quarter financial performance reflected the leverage in our
disposal and re-refinery networks, as we grew our Adjusted EBITDA at a
higher rate than revenue. As a result, we expanded our Adjusted EBITDA
margins by more than 40 basis points from a year ago."

Second-quarter revenues increased 13% to $849.1 million, compared with
$752.8 million in the same period a year ago. Income from operations
grew 38% to $64.4 million from $46.7 million in the second quarter of

Net income for the second quarter of 2018 was $30.7 million, or $0.54
per diluted share, compared with net income for the second quarter of
2017 of $25.9 million, or $0.45 per diluted share. Second quarter 2017
net income included the after-tax gain on sale from the divestiture of
the Company's transformer services business, an after-tax loss on the
early extinguishment of debt and a non-cash charge from tax-related
valuation allowances in Canada. Excluding these impacts, adjusted net
income for the second quarter of 2017 was $13.7 million, or $0.24 per
diluted share. Results for the second quarter of 2018 and 2017
included pre-tax integration and severance costs of $2.3 million and
$1.8 million, respectively.

Adjusted EBITDA (see description below) in the second quarter of 2018
increased 16% to $139.6 million, compared with $120.7 million in the
same period of 2017.

"Within our Environmental Services segment, incinerator utilization in
the quarter was 90%, compared with 87% in the same period of 2017,"
McKim said. "We substantially improved our mix of incineration waste
streams led by record drum volumes and growing contributions from our
chemical and manufacturing verticals. Our Industrial Services business
benefited from a healthy turnaround season in both the U.S. and Canada.
We continue to be encouraged by the early performance of Veolia's U.S.
Industrial Services business. While there were no large emergency
response projects recorded in the quarter, we won a steady stream of
smaller projects across multiple regions within our Field Services

"Within Safety-Kleen, we generated a double-digit increase in
profitability for the third consecutive quarter. Adjusted EBITDA margins
in this segment improved by 260 basis points from a year ago to 24.8%,
as the team again effectively managed the spread in our used motor oil
business while driving growth in our branch network," McKim said. "We
grew waste oil collection volumes from those of a year ago, while
maintaining an average charge-for-oil (CFO) position for those collected
gallons. We continued to steadily grow direct lubricant sales through
our closed-loop initiative, which has now surpassed 20,000 customers.
Direct lubricant sales accounted for 6% of our total volumes sold in the
quarter, up from the prior year and from the first quarter of 2018."

Debt Refinancing

Clean Harbors recently refinanced a portion of its long-term debt. The
Company successfully executed a tender process in July, extinguishing
more than 80% of its $400 million of Senior Unsecured Notes due 2020.
Clean Harbors intends to redeem the remaining portion of the 2020 Senior
Unsecured Notes today. The Company is replacing those 2020 Notes with a
recently completed $350 million expansion of its variable Term Loan B
facility and a $50 million drawdown on its existing revolver. The
Company intends to put an interest rate swap in place in the coming
weeks to reduce the variable rate nature of the Term Loan B expansion.

"In aggregate, we expect these activities to save the Company more than
$2 million in annual interest expense," said Executive Vice President
and Chief Financial Officer Michael L. Battles. "This successful
refinancing also will provide us with greater financial flexibility
going forward and extends the debt maturity date of our Term Loan to

Business Outlook and Financial Guidance

"We concluded the first half of 2018 with strong momentum in multiple
markets, and we are optimistic about our prospects going forward," McKim
said. "Within Environmental Services, we have a considerable
backlog of projects in our pipeline, particularly within the chemical
industry, which should drive additional volumes into our disposal
facilities. The acquisition of Veolia should continue to strengthen our
Industrial Services business and amplify the growth opportunities for
our specialty lines of business. In addition, the rise in crude prices
and greater drilling activity are supporting a mild recovery in our
energy-related businesses. For Safety-Kleen, the focus in the second
half of the year will be on further enhancing margins through pricing
strategies, continuing to advance our blended oil sales programs and
capitalizing on cross-selling opportunities.

"As a result of our year-to-date performance and favorable trends in our
key markets, we are increasing both our Adjusted EBITDA and adjusted
free cash flow guidance for 2018. We anticipate a strong second half of
the year with consistent profitable growth," McKim concluded.

Based on its recent financial performance and current market conditions,
Clean Harbors raised its full-year 2018 Adjusted EBITDA guidance to a
range of $460 million to $490 million, compared with its prior range of
$440 million to $480 million. On a GAAP basis, the Company's revised
guidance is based on projected 2018 net income in the range of $30
million to $59 million. A reconciliation of the Company's Adjusted
EBITDA guidance to net income guidance is included below. Clean Harbors
also increased its adjusted free cash flow guidance. The Company
currently expects to generate adjusted free cash flow for 2018 in the
range of $135 million to $165 million, compared with its previous range
of $125 million to $155 million, which is based on projected 2018 net
cash from operating activities in the range of $305 million to $355

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 and six months ended June 30, 2018 and 2017 (in thousands):

  For the Three Months Ended:     For the Six Months Ended:
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
Net income $30,747 $25,880 $18,116 $4,487
Accretion of environmental liabilities 2,448 2,416 4,878 4,706
Depreciation and amortization 72,760 71,531 147,604 143,943
Other (income) expense, net (846) 833 (547) 2,382
Loss on early extinguishment of debt 6,045 6,045
Gain on sale of business (31,722) (31,722)
Interest expense, net 20,769 22,492 41,039 45,068
Provision for income taxes 13,683 23,216 16,736 25,917
Adjusted EBITDA $139,561 $120,691 $227,826 $200,826

This press release includes a discussion of net income and earnings per
share adjusted for the loss on early extinguishment of debt, the gain on
sale of business and the non-cash 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,
2018 and 2017 (in thousands, except per share amounts):

  For the Three Months Ended:   For the Six Months Ended:
June 30, 2018   June 30, 2017 June 30, 2018   June 30, 2017
Adjusted net income
Net income $30,747 $25,880 $18,116 $4,487
Loss on early extinguishment of debt, net of tax 3,627 3,627
Gain on sale of business, net of tax (18,513) (18,513)
Tax-related valuation allowances 40 2,705 6,101 13,156
Adjusted net income $30,787 $13,699 $24,217
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