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Clean Harbors Announces Third-Quarter 2021 Financial Results

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  • Reports 22% Increase in Q3 Revenues to $951.5 Million

  • Delivers Q3 Net Income of $65.4 Million, or EPS of $1.20, with Adjusted EPS of $1.14

  • Achieves 10% Growth in Q3 Adjusted EBITDA to $185.1 Million With Margin of 19.5%

  • Raises Full-Year 2021 Adjusted EBITDA and Adjusted Free Cash Flow Guidance

NORWELL, Mass., November 03, 2021--(BUSINESS WIRE)--Clean Harbors, Inc. ("Clean Harbors") (NYSE: CLH), the leading provider of environmental and industrial services throughout North America, today announced financial results for the third quarter ended September 30, 2021.

"In the quarter, we experienced a continuation of many of the favorable trends that have supported our business all year – substantial volumes of high-value waste streams for disposal, a wider than normal spread in the re-refining market and steadily growing demand for many of our service businesses," said Alan S. McKim, Chairman, President and Chief Executive Officer. "These factors enabled us to exceed our guidance and deliver the highest quarterly revenue in Company history. In a market environment disrupted by supply chain bottlenecks, labor shortages and inflationary cost pressures, our financial results reflect the strong execution by our leadership team in managing through challenging conditions."

Third-Quarter 2021 Results

Revenues increased 22% to $951.5 million from $779.3 million in the same period of 2020. Income from operations grew 25% to $104.8 million from $83.9 million in the third quarter of 2020.

Net income was $65.4 million, or $1.20 per diluted share. This compares with net income of $54.9 million, or $0.99 per diluted share, for the same period in 2020. Adjusted for certain items in both periods, adjusted net income was $62.2 million, or $1.14 per diluted share, for the third quarter of 2021, compared with adjusted net income of $49.9 million, or $0.90 per diluted share, in the same period of 2020. (See reconciliation tables below) Net income and adjusted net income results for the third quarter of 2021 included pre-tax integration and severance costs of $6.2 million, primarily related to the acquisition of HydroChemPSC. Comparable costs in the third quarter of 2020 were $1.8 million.

Adjusted EBITDA (see description below) increased 10% to $185.1 million from $167.8 million in the same period of 2020. Benefits from Canadian pandemic programs accounted for $1.1 million of contributions in the third quarter of 2021, compared with $13.3 million in benefits from both Canadian and U.S. government programs in the same period of 2020.

Q3 2021 Review

"Revenues in our Environmental Services segment increased 15%, reflecting strong demand for our disposal and recycling services, as well as growth in many of our service businesses," McKim said. "Our incineration network produced utilization of 82%, compared with 80% in the prior year, driven by record drum volumes and direct burn streams. We raised prices to help offset cost increases and focused our available capacity on high-value waste streams, resulting in an 18% increase in the average price per pound from a year ago. Landfill volumes were down 5% due to lower project activity, but our average price per ton increased 17% due to the mix of waste. Our Safety-Kleen Environmental branches registered another solid quarter, with most core service offerings trending up. For the second consecutive quarter we saw a sizeable increase in our Industrial Services business, as customers continue to address the substantial backlog of deferred maintenance related to the pandemic."

"With industry dynamics on the supply side remaining favorable, our Safety-Kleen Sustainability Solutions (SKSS) segment again delivered exceptional results. Revenues grew 60% from a year ago while Adjusted EBITDA more than doubled," McKim said. "Demand for our base and blended oil was high throughout the quarter, leading to a healthy pricing environment. Market conditions, including the underlying impact of IMO 2020, enabled us to deliver the widest re-refinery spread in our history. Waste oil collections were strong at 60 million gallons, up from 50 million a year ago."

Business Outlook and Financial Guidance

"The positive demand environment in North America that we have witnessed all year is showing no signs of slowing as we enter the final quarter of 2021," McKim said. "Customers continue to rely on Clean Harbors for their environmental and industrial needs, and to be their sustainability partner. We expect to conclude the year with a strong finish in all our core lines of business. In early October, we completed the acquisition of HydroChemPSC ("HPC"), which we believe will accelerate our growth momentum as we take a leadership position in the U.S. Industrial Services market. Within our Environmental Services segment, we have a considerable backlog of waste volumes within our network and at our customers’ sites. Our Field Services business has transitioned well from COVID-19 decontamination work back to its core operations, and the addition of HPC’s utility group will expand our scale. The main challenge for this segment in the coming months will be navigating through the ongoing headwinds of cost inflation, supply chain disruption, labor availability and transportation-related limitations. We intend to accelerate the pricing initiatives we have underway to combat these cost and labor challenges.

"Within our SKSS segment, the wide spread between used oil to base oil pricing has continued into the back half of the year based on market conditions. The changes we have made in creating the SKSS business will also continue to benefit us going forward," McKim concluded. "Overall, we continue to maintain a favorable outlook in both of our segments for the remainder of the year and into 2022."

Based on its third-quarter financial performance, completion of the HPC acquisition and current market conditions, Clean Harbors is raising its 2021 guidance. For the year, the Company now expects:

  • Adjusted EBITDA in the range of $655 million to $675 million, including an approximately $15 million contribution from HPC. This range is based on anticipated GAAP net income in the range of $171 million to $196 million; and

  • Adjusted free cash flow in the range of $310 million to $330 million, based on anticipated net cash from operating activities in the range of $500 million to $540 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 nine months ended September 30, 2021 and 2020 (in thousands, except percentages):

For the Three Months Ended

For the Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Net income

$

65,443

$

54,910

$

154,254

$

95,505

Accretion of environmental liabilities

2,799

2,822

8,625

8,149

Stock-based compensation

6,001

6,662

12,786

12,739

Depreciation and amortization

71,451

74,470

215,206

221,497

Other (income) expense, net

(199

)

(2,268

)

2,509

597

Loss on sale of businesses

118

3,376

Interest expense, net of interest income

17,984

17,407

53,953

54,848

Provision for income taxes

21,605

13,712

54,973

35,269

Adjusted EBITDA

$

185,084

$

167,833

$

502,306

$

431,980

Adjusted EBITDA Margin

19.5

%

21.5

%

18.7

%

18.4

%

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 and other items 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 and nine months ended September 30, 2021 and 2020 (in thousands, except per share amounts):

For the Three Months Ended

For the Nine Months Ended

September 30,

2021

September 30,

2020

September 30,

2021

September 30,

2020

Adjusted net income

Net income

$

65,443

$

54,910

$

154,254

$

95,505

Loss on sale of businesses

118

3,376

Tax-related valuation allowances and other*

(3,228

)

(5,128

)

(3,221

)

(4,502

)

Adjusted net income

$

62,215

$

49,900

$

151,033

$

94,379

Adjusted earnings per share

Earnings per share

$

1.20

$

0.99

$

2.81

$

1.71

Loss on sale of businesses

0.06

Tax-related valuation allowances and other*

(0.06

)

(0.09

)

(0.06

)

(0.08

)

Adjusted earnings per share

$

1.14

$

0.90

$

2.75

$

1.69

* For the three and nine months ended September 30, 2020, other amounts include a $1.6 million benefit, or $0.03 per share, related to tax benefits from impacts of amendments to prior period tax filings.

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 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 and nine months ended September 30, 2021 and 2020 (in thousands):

For the Three Months Ended

For the Nine Months Ended

September 30,

2021

September 30,

2020

September 30,

2021

September 30,

2020

Adjusted free cash flow

Net cash from operating activities

$

102,794

$

143,946

$

368,226

$

317,432

Additions to property, plant and equipment

(54,666

)

(24,636

)

(146,654

)

(150,357

)

Purchase and capital improvements of corporate HQ

21,080

Proceeds from sale and disposal of fixed assets

12,945

4,206

16,424

7,307

Adjusted free cash flow

$

61,073

$

123,516

$

237,996

$

195,462

Adjusted EBITDA Guidance Reconciliation

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

For the Year Ending

December 31, 2021

Projected GAAP net income

$171

to

$196

Adjustments:

Accretion of environmental liabilities

12

to

11

Stock-based compensation

18

to

19

Depreciation and amortization

305

to

295

Other expense, net

3

to

3

Interest expense, net

78

to

77

Provision for income taxes

68

to

74

Projected Adjusted EBITDA

$655

to

$675

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

$500

to

$540

Additions to property, plant and equipment

(206

)

to

(226

)

Proceeds from sale and disposal of fixed assets

16

to

16

Projected adjusted free cash flow

$310

to

$330

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 impact of the HPC acquisition 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

For the Nine Months Ended

September 30,

2021

September 30,

2020

September 30,

2021

September 30,

2020

Revenues

$

951,479

$

779,344

$

2,686,085

$

2,347,907

Cost of revenues: (exclusive of items shown separately below)

639,232

511,629

1,817,654

1,588,976

Selling, general and administrative expenses

133,164

106,544

378,911

339,690

Accretion of environmental liabilities

2,799

2,822

8,625

8,149

Depreciation and amortization

71,451

74,470

215,206

221,497

Income from operations

104,833

83,879

265,689

189,595

Other income (expense), net

199

2,268

(2,509

)

(597

)

Loss on sale of businesses

(118

)

(3,376

)

Interest expense, net

(17,984

)

(17,407

)

(53,953

)

(54,848

)

Income before provision for income taxes

87,048

68,622

209,227

130,774

Provision for income taxes

21,605

13,712

54,973

35,269

Net income

$

65,443

$

54,910

$

154,254

$

95,505

Earnings per share:

Basic

$

1.20

$

0.99

$

2.83

$

1.72

Diluted

$

1.20

$

0.99

$

2.81

$

1.71

Shares used to compute earnings per share - Basic

54,411

55,592

54,553

55,646

Shares used to compute earnings per share - Diluted

54,707

55,738

54,862

55,832

CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

$

646,663

$

519,101

Short-term marketable securities

64,844

51,857

Accounts receivable, net

703,199

611,534

Unbilled accounts receivable

69,912

55,681

Inventories and supplies

228,682

220,498

Prepaid expenses and other current assets

70,864

67,051

Total current assets

1,784,164

1,525,722

Property, plant and equipment, net

1,508,356

1,525,298

Other assets:

Operating lease right-of-use assets

137,429

150,341

Goodwill

543,028

527,023

Permits and other intangibles, net

366,497

386,620

Other

14,825

16,516

Total other assets

1,061,779

1,080,500

Total assets

$

4,354,299

$

4,131,520

Current liabilities:

Current portion of long-term debt

$

7,535

$

7,535

Accounts payable

286,565

195,878

Deferred revenue

86,589

74,066

Accrued expenses and other current liabilities

299,427

295,823

Current portion of closure, post-closure and remedial liabilities

23,288

26,093

Current portion of operating lease liabilities

36,497

36,750

Total current liabilities

739,901

636,145

Other liabilities:

Closure and post-closure liabilities, less current portion

82,809

74,023

Remedial liabilities, less current portion

97,747

102,623

Long-term debt, less current portion

1,546,284

1,549,641

Operating lease liabilities, less current portion

102,093

114,258

Deferred tax liabilities

231,663

230,097

Other long-term liabilities

90,242

83,182

Total other liabilities

2,150,838

2,153,824

Total stockholders’ equity, net

1,463,560

1,341,551

Total liabilities and stockholders’ equity

$

4,354,299

$

4,131,520

CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Nine Months Ended

September 30,

2021

September 30,

2020

Cash flows from operating activities:

Net income

$

154,254

$

95,505

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

Depreciation and amortization

215,206

221,497

Allowance for doubtful accounts

7,186

10,441

Amortization of deferred financing costs and debt discount

2,718

2,688

Accretion of environmental liabilities

8,625

8,149

Changes in environmental liability estimates

341

9,050

Deferred income taxes

5,202

Other expense, net

2,509

597

Stock-based compensation

12,786

12,739

Loss on sale of businesses

3,376

Environmental expenditures

(12,223

)

(8,816

)

Changes in assets and liabilities, net of acquisitions:

Accounts receivable and unbilled accounts receivable

(113,601

)

23,969

Inventories and supplies

(12,882

)

(9,554

)

Other current and non-current assets

(10,785

)

(19,320

)

Accounts payable

86,974

(63,898

)

Other current and long-term liabilities

21,916

31,009

Net cash from operating activities

368,226

317,432

Cash flows used in investing activities:

Additions to property, plant and equipment

(146,654

)

(150,357

)

Proceeds from sale and disposal of fixed assets

16,424

7,307

Acquisitions, net of cash acquired

(22,819

)

(8,839

)

Proceeds from sale of businesses, net of transactional costs

7,712

Additions to intangible assets including costs to obtain or renew permits

(2,659

)

(1,863

)

Proceeds from sale of available-for-sale securities

83,226

39,141

Purchases of available-for-sale securities

(96,785

)

(53,397

)

Net cash used in investing activities

(169,267

)

(160,296

)

Cash flows used in financing activities:

Change in uncashed checks

(4,323

)

381

Tax payments related to withholdings on vested restricted stock

(7,383

)

(4,407

)

Repurchases of common stock

(48,409

)

(39,542

)

Deferred financing costs paid

(150

)

Payments on finance leases

(5,845

)

(2,755

)

Principal payments on debt

(5,652

)

(5,652

)

Borrowing from revolving credit facility

150,000

Payment on revolving credit facility

(150,000

)

Net cash used in financing activities

(71,762

)

(51,975

)

Effect of exchange rate change on cash

365

(1,446

)

Increase in cash and cash equivalents

127,562

103,715

Cash and cash equivalents, beginning of period

519,101

371,991

Cash and cash equivalents, end of period

$

646,663

$

475,706

Supplemental information:

Cash payments for interest and income taxes:

Interest paid

$

61,807

$

66,000

Income taxes paid, net of refunds

48,202

14,195

Non-cash investing activities:

Property, plant and equipment accrued

11,561

11,732

ROU assets obtained in exchange for operating lease liabilities

18,528

19,993

ROU assets obtained in exchange for finance lease liabilities

18,704

28,333

Supplemental Segment Data (in thousands)

For the Three Months Ended

Revenue

September 30, 2021

September 30, 2020

Third Party

Revenues

Intersegment

Revenues

(Expense),

net

Direct

Revenues

Third Party

Revenues

Intersegment

Revenues

(Expense),

net

Direct

Revenues

Environmental Services

$

743,831

$

1,802

$

745,633

$

651,689

$

(1,129

)

$

650,560

Safety-Kleen Sustainability Solutions

207,589

(1,802

)

205,787

127,583

1,129

128,712

Corporate Items

59

59

72

72

Total

$

951,479

$

$

951,479

$

779,344

$

$

779,344

For the Nine Months Ended

Revenue

September 30, 2021

September 30, 2020

Third Party

Revenues

Intersegment

Revenues

(Expense),

net

Direct

Revenues

Third Party

Revenues

Intersegment

Revenues

(Expense),

net

Direct

Revenues

Environmental Services

$

2,119,856

$

4,476

$

2,124,332

$

1,969,445

$

(1,099

)

$

1,968,346

Safety-Kleen Sustainability Solutions

566,012

(4,476

)

561,536

378,244

1,099

379,343

Corporate Items

217

217

218

218

Total

$

2,686,085

$

$

2,686,085

$

2,347,907

$

$

2,347,907

For the Three Months Ended

For the Nine Months Ended

Adjusted EBITDA

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Environmental Services

$

166,471

$

180,002

$

482,766

$

502,101

Safety-Kleen Sustainability Solutions

70,810

29,613

165,756

62,248

Corporate Items

(52,197

)

(41,782

)

(146,216

)

(132,369

)

Total

$

185,084

$

167,833

$

502,306

$

431,980

View source version on businesswire.com: https://www.businesswire.com/news/home/20211103005207/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