Market Overview

Clean Harbors Announces First-Quarter 2019 Financial Results

Share:
  • Increases Q1 Revenues 4% to $780.8 Million
  • Reports Net Income of $1.0 Million, or $0.02 per Diluted Share;
    Adjusted EPS of $0.09
  • Generates 15% Increase in Q1 Adjusted EBITDA to $101.7 Million on
    Strength in Environmental Services Segment
  • Improves Adjusted EBITDA Margin by 120 Basis Points
  • Revises 2019 Adjusted EBITDA Guidance Upward to $510 Million to
    $540 Million and Maintains Adjusted Free Cash Flow Guidance of $190
    Million to $220 Million

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):

   

For the Three Months Ended:

   

March 31, 2019

 

March 31, 2018

 
Net income (loss) $976 ($12,631)
Accretion of environmental liabilities 2,574 2,430
Depreciation and amortization 75,355 74,844
Other (income) expense, net (2,983) 299
Interest expense, net 19,764 20,270
Provision for income taxes 5,977 3,053
Adjusted EBITDA

$101,663

$88,265

Adjusted EBITDA Margin 13.0%

11.8%

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):

    For the Three Months Ended:
   

March 31,
2019

 

March 31,
2018

Adjusted net income (loss)
Net income (loss) $976 ($12,631)
Tax-related valuation allowances 4,106 6,061
Adjusted net income (loss) $5,082 ($6,570)
 
Adjusted earnings (loss) per share

 

 

Earnings (loss) per share

$0.02

($0.22)

Tax-related valuation allowances

0.07

0.10

Adjusted earnings (loss) per share

$0.09

($0.12)

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):

    For the Three Months Ended:
    March 31, 2019   March 31, 2018
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