Clean Harbors Reports Fourth-Quarter and Year-End 2012 Financial Results

Clean Harbors Reports Fourth-Quarter and Year-End 2012 Financial Results

  • Company Achieves Q4 Revenue of $559 Million and $2.19 Billion for 2012
  • 2012 Net Income of $129.7 Million Reflects Release of Unrecognized Tax Benefits
  • Adjusted EBITDA Increases 7% in 2012 to $373.8 Million
  • Company Confirms 2013 Annual Guidance

NORWELL, Mass.--(BUSINESS WIRE)-- Clean Harbors, Inc. ("Clean Harbors") (NYS: CLH) , the leading provider of environmental, energy and industrial services throughout North America,today announced financial results for the fourth quarter and year ended December 31, 2012.

Revenues for the fourth quarter increased to $559.0 million compared with $545.9 million in the same period in 2011. Income from operations in the fourth quarter of 2012 decreased to $36.2 million from $59.2 million in the same period of 2011 primarily based on costs associated with the Safety-Kleen acquisition and an increase in depreciation and amortization expense.


Fourth quarter 2012 net income was $61.9 million, or $1.11 per diluted share, compared with $38.2 million, or $0.72 per diluted share, in the fourth quarter of 2011. Fourth-quarter 2012 net income included a $52.4 million benefit from the release of unrecognized tax benefits due to expired statute of limitation periods, partially offset by approximately $7.5 million (net of tax) in costs related to the Safety-Kleen acquisition. Adjusted EBITDA (see description below) in the fourth quarter of 2012, which includes the costs related to Safety-Kleen, was $83.6 million compared with $97.4 million in the same period of 2011.

Comments on the Fourth Quarter

"We achieved year-over-year revenue growth in the fourth quarter as strong contributions in our Industrial Services and Field Services segments offset a slowdown in our Oil & Gas Field Services segment," said Alan S. McKim, Chairman and Chief Executive Officer. "Our margins in the quarter were affected by both external and internal costs associated with our $1.25 billion acquisition of Safety-Kleen, which we completed in late December. Our bottom-line benefited from the reversal of reserves we had previously accrued related to unrecognized tax benefits."

"Within our operating segments, Technical Services had a solid quarter with 90% utilization at our incineration facilities and very high landfill volumes, driven again by Bakken-related work and large-scale projects," McKim said. "Field Services generated double-digit growth in its base business, along with approximately $12 million in clean-up work associated with Hurricane Sandy. Within Industrial Services, lodging, specialty services and Oil Sands-related work all contributed to a strong quarterly performance in this segment. Within Oil & Gas Field Services, the winter drilling season was not as robust as the same period in 2011 with lower rig counts in Western Canada and margin pressure in the U.S. related to the shift away from natural gas."

Full-Year 2012 Results

Revenues for 2012 increased 10% to a record $2.19 billion from $1.98 billion in 2011. Income from operations in 2012 was $202.2 million compared with $217.7 million in 2011. 2012 net income was $129.7 million, or $2.40 per diluted share, compared with $127.3 million, or $2.39 per diluted share, in 2011. Adjusted EBITDA (see description below) increased 7% in 2012 to a record $373.8 million from $350.0 million for 2011.

"In 2012, we again achieved double-digit growth and delivered Adjusted EBITDA margins (Adjusted EBITDA divided by revenues) for the year of 17%," McKim said. "A number of our businesses - ranging from landfills to turnaround services to lodging - generated record results in 2012, which offset some of the near-term challenges we experienced in the energy space. With the completion of the Safety-Kleen acquisition at year-end, we exited 2012 with significant momentum and many exciting growth opportunities."

Business Outlook and Financial Guidance

"Our outlook for 2013 and beyond is enhanced by our acquisition of Safety-Kleen in late December," McKim said. "Safety-Kleen brings well-established leadership positions in several important lines of business, including parts washers, small quantity waste generators, used oil collection and recycling. The transaction significantly broadens our portfolio of services and will generate a substantial increase in disposal volumes. The addition of Safety-Kleen also enhances our commitment to sustainability and enables us to capitalize on the growing demand for recycled products including re-refined oil. We remain confident that this acquisition will enhance our cash flow generation going forward and build significant long-term value for our shareholders."

"Following the completion of the Safety-Kleen acquisition, we are aggressively moving forward with our integration plans," McKim said. "Our integration teams are identifying areas where we believe we can reduce costs and improve efficiencies by streamlining functions. Through reductions in redundant headcount, increased asset utilization and economies of scale in areas such as procurement and IT, we are currently targeting $60 to $65 million in acquisition-related synergies in 2013 - up from our previously announced target of $30 million. At the same time, we are seeing a near-term pricing imbalance in the Group 2 lubricants market. These additional costs savings will help offset this pricing pressure. We are confident that we can leverage the operational efficiencies of our combined organization to further enhance the long-term profitability of Clean Harbors."

"Looking ahead, we are optimistic about our overall prospects for profitable growth based on favorable industry trends. We see substantial cross-selling and long-term growth opportunities within each of our segments. Within Technical Services and Field Services, we have a healthy pipeline of ongoing and potential projects that should continue to drive considerable waste volumes into our disposal network. Throughout 2012, our Industrial Services business consistently delivered strong results based on steady demand, and we expect that to continue in the coming year. Our Oil & Gas Field Services segment is well-positioned to rebound from the slowdown we experienced in 2012 as the transformation and growth of the North American energy market continues in the years ahead," McKim concluded.

Based on its 2012 performance and current market conditions, Clean Harbors is confirming its previously announced 2013 annual revenue and Adjusted EBITDA guidance. The Company continues to expect 2013 revenues in the range of $3.72 billion to $3.77 billion. For 2013, the Company expects Adjusted EBITDA in the range of $605 million to $620 million. A reconciliation of the Company's Adjusted EBITDA guidance to net income guidance is included below. The Company's full-year Adjusted EBITDA guidance excludes an estimated $20 million of one-time non-cash acquisition-related fair value adjustments to inventory values and deferred revenue to be amortized in the Company's first-quarter results.

Non-GAAP Results

Clean Harbors reports Adjusted EBITDA results, which is a non-GAAP financial measure, as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP). 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. 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 fourth quarter and full-year 2012 and 2011 (in thousands):

   For the three months ended:  

 

For the year ended:

December 31,
2012

 

December 31,
2011

December 31,
2012

 

December 31,
2011

  
Net income$61,874$38,233$129,674$127,252
Accretion of environmental liabilities2,5082,4499,9179,680
Depreciation and amortization44,85235,663161,646122,663
Other expense (income)337(471)802(6,402)
Loss on early extinguishment of debt26,385
Interest expense, net13,45111,34247,28739,389
(Benefit) provision for income taxes (39,431)  10,143   (1,944)  57,426 
Adjusted EBITDA$83,591  $97,359  $373,767  $350,008 
 

Adjusted EBITDA Guidance Reconciliation

An itemized reconciliation between projected net income and projected Adjusted EBITDA is as follows:

 For the Year Ended December 31, 2013
Amount Margin % (1)
(In millions)  
Projected GAAP net income

$ 141

 to 

$ 164

3.8%

to

4.3%

Adjustments:

Amortization of acquisition-related fair value adjustments to inventory and deferred revenue

20

to

20

0.5%

to

0.5%

Accretion of environmental liabilities13to11

0.4%

to0.3%
Depreciation and amortization265to2557.1%to6.8%
Other (income) expense-to-0.0%to0.0%
Loss on early extinguishment of debt-to-0.0%to0.0%
Interest expense, net79to782.1%to2.1%
Provision for income taxes

87

 to 

92

2.4%

 to 

2.4%

Projected Adjusted EBITDA$ 605 to $ 62016.3% to 16.4%
 
Revenues (In millions)$3,720to$3,770
 

(1) The Margin % indicates the percentage that the line-item represents to total revenues for the respective reporting period, calculated by dividing the dollar amount for the line-item by total revenues for the reporting period.

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 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 (NYS: CLH) is the leading provider of environmental, energy and industrial services throughout North America. The Company serves a diverse customer base, including a majority of the Fortune 500 companies, thousands of smaller private entities and numerous federal, state, provincial and local governmental agencies. Through its Safety-Kleen subsidiary, Clean Harbors also is a premier provider of used oil recycling and re-refining, parts washers and environmental services for the small quantity generator market.

Headquartered in Massachusetts, Clean Harbors has waste disposal facilities and service locations throughout the United States and Canada, as well as 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 the benefits of the acquisition of Safety-Kleen, including future financial and operating results, the combined company's plans, objectives, expectations and intentions 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 INCOME
(in thousands except per share amounts)
         
For the three months ended:For the year ended:
December 31,December 31,December 31,December 31,

2012

2011

2012

2011

 
Revenues$558,962$545,886$2,187,908$1,984,136
Cost of revenues (exclusive of items shown separately below)399,743373,1421,540,6211,379,991
Selling, general and administrative expenses75,62875,385273,520254,137
Accretion of environmental liabilities2,5082,4499,9179,680
Depreciation and amortization 44,852  35,663  161,646  122,663 
Income from operations36,23159,247202,204217,665
Other (expense) income(337)471(802)6,402
Loss on early extinguishment of debt(26,385)
Interest (expense), net (13,451) (11,342) (47,287) (39,389)
Income before (benefit) provision for income taxes22,44348,376127,730184,678
(Benefit) provision for income taxes (39,431) 10,143  (1,944) 57,426 
Net income$61,874 $38,233 $129,674 $127,252 
Earnings per share:
Basic$1.11 $0.72 $2.41 $2.40 
Diluted$1.11 $0.72 $2.40 $2.39 
 
Weighted average common shares outstanding 55,614  53,081  53,884  52,931 

Weighted average common shares outstanding plus potentially
  dilutive common shares

 55,746  53,401  54,079  53,324 
 
CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(in thousands)
     
December 31,December 31,

2012

2011

Current assets:
Cash and cash equivalents$229,836$260,723
Marketable securities11,778111
Accounts receivable, net541,423449,553
Unbilled accounts receivable27,07229,385
Deferred costs6,8885,903
Prepaid expenses and other current assets75,77873,349
Supplies inventories171,44156,242
Deferred tax assets 22,577 16,602
Total current assets 1,086,793 891,868
 
Property, plant and equipment, net 1,531,763 903,947
 
Other assets:

Long-term investments

4,3544,245
Deferred financing costs21,65713,607
Goodwill593,771122,392
Permits and other intangibles, net572,817139,644
Other 14,651<
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