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Clean Harbors Announces First-Quarter 2021 Financial Results

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  • Reports Q1 Revenues of $808.1 Million

  • Achieves Q1 Net Income of $21.7 Million, or EPS of $0.39, with Adjusted EPS of $0.42

  • Increases Q1 Adjusted EBITDA to $129.5 Million

  • Improves Adjusted EBITDA Margin by 130 Basis Points to 16.0%

  • Creates Safety-Kleen Sustainability Solutions Segment

  • Raises 2021 Adjusted EBITDA and Adjusted Free Cash Flow Guidance

Clean Harbors, Inc. ("Clean Harbors") (NYSE: CLH), the leading provider of environmental and industrial services throughout North America, today announced financial results for the first quarter ended March 31, 2021.

"We opened 2021 with a better-than-expected first-quarter performance," said Alan S. McKim, Chairman, President and Chief Executive Officer. "We delivered Adjusted EBITDA that exceeded our guidance driven by a combination of greater volumes of high-value waste streams in our disposal network and a rising pricing environment for base oil. These factors, combined with ongoing cost controls and productivity initiatives, contributed to a 130 basis-point improvement in our Adjusted EBITDA margin. Overall, we experienced favorable trends across many of our key industry verticals, supported by the improving macroeconomic environment."

First-Quarter 2021 Results

Revenues decreased 6% to $808.1 million from $858.6 million in the same period of 2020. Income from operations grew 12% to $50.9 million from $45.5 million.

Net income was $21.7 million, or $0.39 per diluted share. This compares with net income of $11.6 million, or $0.21 per diluted share, for the same period in 2020. Adjusted for certain items in both periods, adjusted net income was $23.4 million, or $0.42 per diluted share, for the first quarter of 2021, compared with adjusted net income of $15.6 million, or $0.28 per diluted share, in the same period of 2020. (See reconciliation table below)

Adjusted EBITDA (see description below) increased 3% to $129.5 million from $125.9 million in the same period of 2020.

New Safety-Kleen Sustainability Solutions Segment

Effective January 2021, the Company reorganized its Safety-Kleen business with a goal of better positioning Safety-Kleen’s sustainable lubricant and bulk product offerings for growth in the marketplace. The newly formed Safety-Kleen Sustainability Solutions (SKSS) segment consists of collection services for waste oil, used oil filters, antifreeze and related items, which will all be more tightly managed under a standalone organization. SKSS encompasses both sides of the spread the Company manages in its re-refinery business, and this change will drive additional growth in its sustainable lubricant products and related services.

In conjunction with the formation of this new segment, the Company completed the consolidation of the Safety-Kleen branches’ core offerings into its legacy Clean Harbors Environmental Services sales and service operations. Clean Harbors expects this change to foster enhanced cross-selling opportunities and enable greater overall market penetration of small quantity generators of hazardous waste. In addition, the Company anticipates productivity gains, cost savings and stronger management through this consolidation.

Q1 2021 Review

"Within our Environmental Services segment, as expected, revenues were down from prior year due to the lingering impacts of the pandemic on project work and certain service lines, compounded by the deep freeze that hit the Gulf region in late February," McKim said. "That adverse weather resulted in incineration utilization in our network of 80% as both our Texas and Arkansas sites had unplanned shutdowns in the first quarter. However, the volume of high-value waste streams from customers continued to grow considerably resulting in an 8% increase in average price per pound. Many of our service businesses that were negatively impacted by the pandemic a year ago, including the Safety-Kleen branches, saw a steady climb in activity during the quarter as the U.S. economy continues to slowly re-open. For example, our number of parts washer services grew 6% sequentially from the fourth quarter of 2020.

"Our newly formed SKSS segment reported flat revenue compared with the prior year as increased base oil pricing, along with higher charge-for-oil (CFO) rates offset lower volumes sold and waste oil collected," McKim continued. "Profitability and margins in the segment rose due to favorable market conditions that enabled us to widen our re-refining spread. Adjusted EBITDA in the segment grew 31% from a year ago with a 480 basis-point improvement in margin. Waste oil collection declined 14% to 47 million gallons in the quarter. The formation of SKSS reflects the greater emphasis we want to place on our green offerings within Safety-Kleen, including our high-quality recycled lubricants. We expect customer demand for these types of environmentally friendly solutions to grow in the years ahead. This new organizational structure also will enable us to collect more waste oil, optimize the supply to our re-refineries and grow sales of our sustainable SK products and services."

Business Outlook and Financial Guidance

"We begin the second quarter with positive momentum across multiple markets and we remain excited about our prospects for 2021," McKim concluded. "We see a promising economic environment as North America reopens from the pandemic. We expect markets we serve that have been held back over the past year to see a meaningful recovery in the quarters ahead, complementing our lines of business that have already experienced growth. We have a favorable outlook in both of our segments for the remainder of the year, which should enable us to deliver profitable growth in 2021 and generate healthy adjusted free cash flow to support our capital allocation strategy."

Based on its first-quarter financial performance and current market conditions, Clean Harbors is raising its full-year 2021 guidance. The Company currently expects:

  • Adjusted EBITDA in the range of $560 million to $600 million, based on anticipated GAAP net income in the range of $116 million to $157 million.

  • Adjusted free cash flow in the range of $230 million to $270 million, based on anticipated net cash from operating activities in the range of $415 million to $475 million.

For the second quarter of 2021, Clean Harbors expects Adjusted EBITDA to increase 15 to 20% from the prior-year period when the COVID-19 pandemic forced shutdowns across North America, which lowered demand for certain of the Company’s lines of business.

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 months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended:

March 31, 2021

March 31, 2020

Net income

$

21,736

$

11,572

Accretion of environmental liabilities

2,953

2,561

Stock-based compensation

3,480

3,291

Depreciation and amortization

72,163

74,533

Other expense, net

1,228

2,365

Loss on sale of businesses

3,074

Interest expense, net of interest income

17,918

18,787

Provision for income taxes

9,973

9,698

Adjusted EBITDA

$

129,451

$

125,881

Adjusted EBITDA Margin

16.0

%

14.7

%

This press release includes a discussion of net income and earnings per share adjusted for the loss on sale of businesses and 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 and adjusted net income, and the difference between earnings per share and adjusted earnings per share, for the three months ended March 31, 2021 and 2020 (in thousands, except per share amounts):

For the Three Months Ended:

March 31, 2021

March 31, 2020

Adjusted net income

Net income

$

21,736

$

11,572

Loss on sale of businesses

3,074

Tax-related valuation allowances

1,648

931

Adjusted net income

$

23,384

$

15,577

Adjusted earnings per share

Earnings per share

$

0.39

$

0.21

Loss on sale of businesses

0.05

Tax-related valuation allowances

0.03

0.02

Adjusted earnings per share

$

0.42

$

0.28

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 its 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, less additions to property, plant and equipment plus proceeds from sale and disposal of fixed assets. The Company excludes cash impacts of items derived from non-operating activities such as taxes paid in connection with divestitures and in 2020 have also excluded cash paid in connection with the purchase of its corporate headquarters and certain capital improvements to the site as these expenditures are considered one-time in nature. 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 the Company’s 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 for the three months ended March 31, 2021 and 2020 (in thousands):

For the Three Months Ended:

March 31, 2021

March 31, 2020

Adjusted free cash flow

Net cash from operating activities

$

103,000

$

33,681

Additions to property, plant and equipment

(41,913)

(82,767)

Purchase and capital improvements of corporate headquarters

20,735

Proceeds from sale and disposal of fixed assets

1,204

2,150

Adjusted free cash flow

$

62,291

$

(26,201)

Adjusted EBITDA Guidance Reconciliation

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

For the Year Ending
December 31, 2021

Projected GAAP net income

$116

to

$157

Adjustments:

Accretion of environmental liabilities

12

to

11

Stock-based compensation

16

to

18

Depreciation and amortization

290

to

280

Interest expense, net

73

to

72

Provision for income taxes

53

to

62

Projected Adjusted EBITDA

$560

to

$600

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):

For the Year Ending
December 31, 2021

Projected net cash from operating activities

$415

to

$475

Additions to property, plant and equipment

(195)

to

(215)

Proceeds from sale and disposal of fixed assets

10

to

10

Projected adjusted free cash flow

$230

to

$270

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 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 in the United States, Canada, Mexico, Puerto Rico and India. 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," "seeks," "should," "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, the risks and uncertainties surrounding COVID-19 and the related impact on the Company’s business, and those items identified as "Risk Factors" in Clean Harbors’ most recently filed Form 10-K and Form 10-Q. Forward-looking statements are neither historical facts nor assurances of future performance. 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 OPERATIONS

(in thousands, except per share amounts)

For the Three Months Ended:

March 31, 2021

March 31, 2020

Revenues

$

808,148

$

858,563

Cost of revenues (exclusive of items shown separately below)

560,536

606,666

Selling, general and administrative expenses

121,641

129,307

Accretion of environmental liabilities

2,953

2,561

Depreciation and amortization

72,163

74,533

Income from operations

50,855

45,496

Other (expense) income, net

(1,228)

(2,365)

Loss on sale of businesses

(3,074)

Interest expense, net

(17,918)

(18,787)

Income before provision for income taxes

31,709

21,270

Provision for income taxes

9,973

9,698

Net income

$

21,736

$

11,572

Earnings per share:

Basic

$

0.40

$

0.21

Diluted

$

0.39

$

0.21

Shares used to compute earnings per share — Basic

54,723

55,757

Shares used to compute earnings per share — Diluted

55,043

56,055

CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

March 31, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

$

496,383

$

519,101

Short-term marketable securities

74,320

51,857

Accounts receivable, net

620,184

611,534

Unbilled accounts receivable

55,239

55,681

Inventories and supplies

219,499

220,498

Prepaid expenses and other current assets

76,726

67,051

Total current assets

1,542,351

1,525,722

Property, plant and equipment, net

1,527,944

1,525,298

Other assets:

Operating lease right-of-use assets

142,006

150,341

Goodwill

543,605

527,023

Permits and other intangibles, net

380,053

386,620

Other

16,580

16,516

Total other assets

1,082,244

1,080,500

Total assets

$

4,152,539

$

4,131,520

Current liabilities:

Current portion of long-term obligations

$

7,535

$

7,535

Accounts payable

213,355

195,878

Deferred revenue

83,165

74,066

Accrued expenses

284,212

295,823

Current portion of closure, post-closure and remedial liabilities

26,896

26,093

Current portion of operating lease liabilities

35,390

36,750

Total current liabilities

650,553

636,145

Other liabilities:

Closure and post-closure liabilities, less current portion

79,218

74,023

Remedial liabilities, less current portion

99,239

102,623

Long-term obligations, less current portion

1,548,517

1,549,641

Operating lease liabilities, less current portion

107,554

114,258

Deferred tax liabilities

230,236

230,097

Other long-term liabilities

88,772

83,182

Total other liabilities

2,153,536

2,153,824

Total stockholders’ equity, net

1,348,450

1,341,551

Total liabilities and stockholders’ equity

$

4,152,539

$

4,131,520

CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Three Months Ended:

March 31, 2021

March 31, 2020

Cash flows from operating activities:

Net income

$

21,736

$

11,572

Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization

72,163

74,533

Allowance for doubtful accounts

2,446

4,700

Amortization of deferred financing costs and debt discount

900

891

Accretion of environmental liabilities

2,953

2,561

Changes in environmental liability estimates

275

3,470

Deferred income taxes

(39)

Other expense, net

1,228

2,365

Stock-based compensation

3,480

3,291

Loss on sale of businesses

3,074

Environmental expenditures

(3,011)

(3,435)

Changes in assets and liabilities, net of acquisitions:

Accounts receivable and unbilled accounts receivable

(9,703)

(24,960)

Inventories and supplies

(747)

(7,024)

Other current and non-current assets

(9,956)

8,714

Accounts payable

22,179

(5,169)

Other current and long-term liabilities

(904)

(40,902)

Net cash from operating activities

103,000

33,681

Cash flows used in investing activities:

Additions to property, plant and equipment

(41,913)

(82,767)

Proceeds from sale and disposal of fixed assets

1,204

2,150

Acquisitions, net of cash acquired

(22,918)

Proceeds from sale of businesses, net of transactional costs

7,856

Additions to intangible assets including costs to obtain or renew permits

(505)

(448)

Proceeds from sale of available-for-sale securities

20,375

12,180

Purchases of available-for-sale securities

(42,980)

(32,058)

Net cash used in investing activities

(86,737)

(93,087)

Cash flows (used in) from financing activities:

Change in uncashed checks

(6,662)

(1,775)

Tax payments related to withholdings on vested restricted stock

(3,719)

(2,224)

Repurchases of common stock

(26,546)

(17,341)

Payments on finance leases

(1,672)

(329)

Principal payments on debt

(1,884)

(1,884)

Deferred financing costs paid

(137)

Borrowings from revolving credit facility

150,000

Net cash (used in) from financing activities

(40,620)

126,447

Effect of exchange rate change on cash

1,639

(6,827)

(Decrease) increase in cash and cash equivalents

(22,718)

60,214

Cash and cash equivalents, beginning of period

519,101

371,991

Cash and cash equivalents, end of period

$

496,383

$

432,205

Supplemental Information:

Cash payments for interest and income taxes:

Interest paid

$

27,507

$

30,648

Income taxes paid, net of refunds

3,599

971

Non-cash investing activities:

Property, plant and equipment accrued

5,108

12,173

ROU assets obtained in exchange for operating lease liabilities

2,305

12,410

ROU assets obtained in exchange for finance lease liabilities

9,205

(856)

Supplemental Segment Data (in thousands)

For the Three Months Ended:

Revenue

March 31, 2021

March 31, 2020

Third Party
Revenues

Intersegment
Revenues
(Expense),
net

Direct
Revenues

Third Party
Revenues

Intersegment
Revenues
(Expense),
net

Direct
Revenues

Environmental Services

$

652,878

$

1,724

$

654,602

$

705,036

$

156

$

705,192

Safety-Kleen Sustainability Solutions

155,191

(1,724)

153,467

153,437

(156)

153,281

Corporate Items

79

79

90

90

Total

$

808,148

$

$

808,148

$

858,563

$

$

858,563

For the Three Months Ended:

Adjusted EBITDA

March 31, 2021

March 31, 2020

Environmental Services

$

140,254

$

145,858

Safety-Kleen Sustainability Solutions

31,632

24,204

Corporate Items

(42,435)

(44,181)

Total

$

129,451

$

125,881

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005245/en/

Contacts

Michael L. Battles
EVP and Chief Financial Officer
Clean Harbors, Inc.
781.792.5100
InvestorRelations@cleanharbors.com

Jim Buckley
SVP Investor Relations
Clean Harbors, Inc.
781.792.5100
Buckley.James@cleanharbors.com