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Clean Harbors Announces Second-Quarter 2021 Financial Results

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·20-min read
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  • Achieves 30% Increase in Q2 Revenues to $926.5 Million

  • Delivers Q2 Net Income of $67.1 Million, or EPS of $1.22, with Adjusted EPS of $1.19

  • Reports Q2 Adjusted EBITDA of $187.8 Million, a 36% Increase; Margin Improves by 80 Basis Points to 20.3%

  • Unveils Incineration Expansion Plan at Kimball, Nebraska Facility Where New State-of-the-Art Kiln will be Constructed

  • Announces Plans to Acquire HydroChemPSC for $1.25 Billion (See Separate News Release Issued Today)

  • Raises 2021 Adjusted EBITDA and Adjusted Free Cash Flow Guidance

NORWELL, Mass., August 04, 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 second quarter ended June 30, 2021.

"Our second-quarter financial results far exceeded our guidance, as we benefitted from a steady flow of high-value waste streams into our disposal network and a strong performance within our Safety-Kleen Sustainability Solutions business," said Alan S. McKim, Chairman, President and Chief Executive Officer. "These factors, coupled with a rebound in demand for many of our service offerings, drove substantial revenue growth and the highest second-quarter Adjusted EBITDA, Adjusted EBITDA margin and adjusted free cash flow in the Company’s history. Positive underlying market trends helped generate growth across all key lines of business."

Second-Quarter 2021 Results
Revenues increased 30% to $926.5 million from $710.0 million in the same period of 2020. Income from operations grew 83% to $110.0 million from $60.2 million in the second quarter of 2020.

Net income was $67.1 million, or $1.22 per diluted share. This compares with net income of $29.0 million, or $0.52 per diluted share, for the same period in 2020. Adjusted for certain items in both periods, adjusted net income was $65.4 million, or $1.19 per diluted share, for the second quarter of 2021, compared with adjusted net income of $28.9 million, or $0.52 per diluted share, in the same period of 2020. (See reconciliation tables below)

Adjusted EBITDA (see description below) increased 36% to $187.8 million from $138.3 million in the same period of 2020. Benefits from Canadian and U.S. government assistance programs accounted for $5.2 million of contributions in the second quarter of 2021 compared with $23.4 million in the same period of 2020.

Q2 2021 Review
"Within our Environmental Services segment, revenues increased 18% from a year ago and 11% from Q1, fueled by growth in disposal and recycling volumes and a surge in Industrial Services activity," McKim said. "Our incineration network continued to see strong demand, particularly for high-value waste streams, leading to utilization of 87% and a 5% increase in the average price per pound from a year ago. Our landfill business rebounded after several challenging quarters due to the pandemic, as volumes grew 13% and the average price increased 10%. Our Safety-Kleen Environmental branches continued their steady recovery, with quarterly parts washer services reaching 240,000 for the first time since the pandemic began. We also saw a meaningful contribution from our Industrial Services business with more than 50% growth driven by a backlog of deferred maintenance by customers during the past year."

"Our Safety-Kleen Sustainability Solutions (SKSS) segment delivered extraordinary growth and profitability in the quarter, as our new segment continues to benefit from the combination of our waste oil collection with our SK Oil business. The supply shortages for base and blended oil, along with the impacts of IMO 2020, created a highly favorable pricing environment," McKim said. "These market conditions led to the widening spread in our used oil market. Segment revenue was up 32% from the first quarter and more than doubled from a year ago, when the pandemic temporarily shut down more than half of our re-refining plants. Adjusted EBITDA in the segment doubled from Q1 and was up more than seven-fold from a year ago. Waste oil collections grew to 57 million gallons from 47 million in the first quarter and from 43 million a year ago."

In late June, Clean Harbors announced the signing of a definitive agreement with Vertex Energy, Inc. (NASDAQ: VTNR) to acquire certain assets related to Vertex’s used motor oil collection and re-refinery business in an all-cash transaction for $140 million, subject to working capital and other adjustments. The acquisition is now expected to close toward the end of the current quarter of 2021 or shortly thereafter, subject to approval by U.S. regulators and Vertex shareholders, and other customary closing conditions.

Company Announces Planned Expansion of Incineration Network Capacity
Clean Harbors plans to construct a 70,000-ton hazardous waste incinerator at the Company’s plant in Kimball, Nebraska, which specializes in the destruction of hazardous and non-hazardous materials. The advanced new kiln will more than double annual incineration capacity at the 600-acre site to nearly 130,000 tons. Costing approximately $180 million to permit and construct over a four-year time frame, the new incinerator will add over 100 full-time workers upon completion.

"Clean Harbors is proud to make this investment in Nebraska to provide much needed environmental service capabilities to the Western U.S.," McKim said. "We are excited to build upon our longtime relationship with the Kimball community, and confident these new jobs and increased business activity will benefit the economy of the region and the entire state."

The Kimball expansion will be designed as North America’s most technologically advanced hazardous waste incinerator, equipped with world-class air emissions control technology that exceeds the Federal Clean Air Act’s most stringent air emissions standards. The plant will be only the second U.S. commercial hazardous waste incinerator to come online in the past 25 years, along with Clean Harbors El Dorado incinerator that opened in early 2017.

"While there is a lengthy permitting process and complex construction requirements, we are targeting having this facility operational in late 2024 and accepting waste in the first half of 2025," McKim said. "We are confident that incineration demand – driven by the ongoing U.S. chemical and manufacturing expansion, and the continuing reduction of captive incinerators – will enable our additional capacity to be readily absorbed when it opens."

Business Outlook and Financial Guidance
"We enter the second half of 2021 with considerable momentum across all our key markets, backed by a promising North American economic environment. We expect a record-setting financial year for the Company," McKim concluded. "Within our Environmental Services segment, we see encouraging signs for steady waste volumes, project work and rising demand for our broad suite of service offerings. With the planned acquisition of HydroChemPSC, we will significantly bolster our capabilities within Industrial Services and Field Services while driving more volumes into our network. Within our SKSS segment, we see our used oil to base oil pricing spread extending until later in the year, and we will continue to see the benefits of separating out this segment. We will continue to capitalize on the opportunities afforded by these current market conditions, and look forward to adding the Vertex facilities, personnel and waste oil collection assets to this segment. 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 second-quarter financial performance and current market conditions, Clean Harbors is raising its 2021 guidance. For the year, the Company currently expects:

  • Adjusted EBITDA in the range of $620 million to $650 million, based on anticipated GAAP net income in the range of $159 million to $193 million; and

  • Adjusted free cash flow in the range of $285 million to $315 million, based on anticipated net cash from operating activities in the range of $475 million to $525 million.

For the third quarter of 2021, Clean Harbors expects Adjusted EBITDA to be at a level similar to or slightly above the third quarter of 2020, when the Company recognized $13.3 million from government assistance programs.

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 six months ended June 30, 2021 and 2020 (in thousands, except percentages):

For the Three Months Ended

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Net income

$

67,075

$

29,023

$

88,811

$

40,595

Accretion of environmental liabilities

2,873

2,766

5,826

5,327

Stock-based compensation

3,305

2,786

6,785

6,077

Depreciation and amortization

71,592

72,494

143,755

147,027

Other expense, net

1,480

500

2,708

2,865

Loss on sale of businesses

184

3,258

Interest expense, net of interest income

18,051

18,654

35,969

37,441

Provision for income taxes

23,395

11,859

33,368

21,557

Adjusted EBITDA

$

187,771

$

138,266

$

317,222

$

264,147

Adjusted EBITDA Margin

20.3

%

19.5

%

18.3

%

16.8

%

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 and six months ended June 30, 2021 and 2020 (in thousands, except per share amounts):

For the Three Months Ended

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Adjusted net income

Net income

$

67,075

$

29,023

$

88,811

$

40,595

Loss on sale of businesses

184

3,258

Tax-related valuation allowances

(1,641

)

(305

)

7

626

Adjusted net income

$

65,434

$

28,902

$

88,818

$

44,479

Adjusted earnings per share

Earnings per share

$

1.22

$

0.52

$

1.62

$

0.73

Loss on sale of businesses

0.06

Tax-related valuation allowances

(0.03

)

0.01

Adjusted earnings per share

$

1.19

$

0.52

$

1.62

$

0.80

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 and six months ended June 30, 2021 and 2020 (in thousands):

For the Three Months Ended

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Adjusted free cash flow

Net cash from operating activities

$

162,432

$

139,805

$

265,432

$

173,486

Additions to property, plant and equipment

(50,075

)

(42,954

)

(91,988

)

(125,721

)

Purchase and capital improvements of corporate HQ

345

21,080

Proceeds from sale and disposal of fixed assets

2,275

951

3,479

3,101

Adjusted free cash flow

$

114,632

$

98,147

$

176,923

$

71,946

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

$

159

to

$

193

Adjustments:

Accretion of environmental liabilities

12

to

11

Stock-based compensation

16

to

18

Depreciation and amortization

290

to

280

Other expense, net

3

to

3

Interest expense, net

73

to

72

Provision for income taxes

67

to

73

Projected Adjusted EBITDA

$

620

to

$

650

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

$

475

to

$

525

Additions to property, plant and equipment

(205

)

to

(225

)

Proceeds from sale and disposal of fixed assets

15

to

15

Projected adjusted free cash flow

$

285

to

$

315

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, the definitive agreement to acquire HydroChemPSC 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 the proposed Clean Harbors and HydroChemPSC transaction, 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 Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Revenues

$

926,458

$

710,000

$

1,734,606

$

1,568,563

Cost of revenues (exclusive of items shown separately below)

617,886

470,681

1,178,422

1,077,347

Selling, general and administrative expenses

124,106

103,839

245,747

233,146

Accretion of environmental liabilities

2,873

2,766

5,826

5,327

Depreciation and amortization

71,592

72,494

143,755

147,027

Income from operations

110,001

60,220

160,856

105,716

Other expense, net

(1,480

)

(500

)

(2,708

)

(2,865

)

Loss on sale of businesses

(184

)

(3,258

)

Interest expense, net

(18,051

)

(18,654

)

(35,969

)

(37,441

)

Income before provision for income taxes

90,470

40,882

122,179

62,152

Provision for income taxes

23,395

11,859

33,368

21,557

Net income

$

67,075

$

29,023

$

88,811

$

40,595

Earnings per share:

Basic

$

1.23

$

0.52

$

1.63

$

0.73

Diluted

$

1.22

$

0.52

$

1.62

$

0.73

Shares used to compute earnings per share — Basic

54,529

55,590

54,625

55,673

Shares used to compute earnings per share — Diluted

54,854

55,748

54,945

55,882

CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 30, 2021

December 31, 2020

Current assets:

Cash and cash equivalents

$

595,574

$

519,101

Short-term marketable securities

70,683

51,857

Accounts receivable, net

659,364

611,534

Unbilled accounts receivable

59,446

55,681

Inventories and supplies

215,725

220,498

Prepaid expenses and other current assets

76,524

67,051

Total current assets

1,677,316

1,525,722

Property, plant and equipment, net

1,531,289

1,525,298

Other assets:

Operating lease right-of-use assets

135,363

150,341

Goodwill

544,639

527,023

Permits and other intangibles, net

374,230

386,620

Other

13,042

16,516

Total other assets

1,067,274

1,080,500

Total assets

$

4,275,879

$

4,131,520

Current liabilities:

Current portion of long-term debt

$

7,535

$

7,535

Accounts payable

249,206

195,878

Deferred revenue

83,733

74,066

Accrued expenses

311,656

295,823

Current portion of closure, post-closure and remedial liabilities

23,865

26,093

Current portion of operating lease liabilities

35,074

36,750

Total current liabilities

711,069

636,145

Other liabilities:

Closure and post-closure liabilities, less current portion

83,742

74,023

Remedial liabilities, less current portion

98,341

102,623

Long-term debt, less current portion

1,547,398

1,549,641

Operating lease liabilities, less current portion

101,377

114,258

Deferred tax liabilities

228,718

230,097

Other long-term liabilities

95,647

83,182

Total other liabilities

2,155,223

2,153,824

Total stockholders’ equity, net

1,409,587

1,341,551

Total liabilities and stockholders’ equity

$

4,275,879

$

4,131,520

CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

For the Six Months Ended

June 30, 2021

June 30, 2020

Cash flows from operating activities:

Net income

$

88,811

$

40,595

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

Depreciation and amortization

143,755

147,027

Allowance for doubtful accounts

2,109

9,006

Amortization of deferred financing costs and debt discount

1,806

1,787

Accretion of environmental liabilities

5,826

5,327

Changes in environmental liability estimates

445

5,607

Deferred income taxes

1,912

Other expense, net

2,708

2,865

Stock-based compensation

6,785

6,077

Loss on sale of businesses

3,258

Environmental expenditures

(6,594

)

(6,104

)

Changes in assets and liabilities, net of acquisitions:

Accounts receivable and unbilled accounts receivable

(51,285

)

67,540

Inventories and supplies

765

(9,024

)

Other current and non-current assets

(12,043

)

(25,840

)

Accounts payable

49,880

(82,134

)

Other current and long-term liabilities

30,552

7,499

Net cash from operating activities

265,432

173,486

Cash flows used in investing activities:

Additions to property, plant and equipment

(91,988

)

(125,721

)

Proceeds from sale and disposal of fixed assets

3,479

3,101

Acquisitions, net of cash acquired

(22,918

)

(8,877

)

Proceeds from sale of businesses, net of transactional costs

7,753

Additions to intangible assets including costs to obtain or renew permits

(1,750

)

(1,242

)

Proceeds from sale of available-for-sale securities

70,526

28,851

Purchases of available-for-sale securities

(89,689

)

(45,550

)

Net cash used in investing activities

(132,340

)

(141,685

)

Cash flows (used in) from financing activities:

Change in uncashed checks

(2,895

)

(1,689

)

Tax payments related to withholdings on vested restricted stock

(4,739

)

(3,395

)

Repurchases of common stock

(45,409

)

(17,341

)

Deferred financing costs paid

(146

)

Payments on finance leases

(3,577

)

(1,790

)

Principal payments on debt

(3,768

)

(3,768

)

Borrowing from revolving credit facility

150,000

Payment on revolving credit facility

(75,000

)

Net cash (used in) from financing activities

(60,534

)

47,017

Effect of exchange rate change on cash

3,915

(3,443

)

Increase in cash and cash equivalents

76,473

75,375

Cash and cash equivalents, beginning of period

519,101

371,991

Cash and cash equivalents, end of period

$

595,574

$

447,366

Supplemental information:

Cash payments for interest and income taxes:

Interest paid

$

34,164

$

38,327

Income taxes paid, net of refunds

32,519

1,478

Non-cash investing activities:

Property, plant and equipment accrued

8,807

7,421

ROU assets obtained in exchange for operating lease liabilities

5,774

16,216

ROU assets obtained in exchange for finance lease liabilities

18,704

16,452

Supplemental Segment Data (in thousands)

For the Three Months Ended

Revenue

June 30, 2021

June 30, 2020

Third Party
Revenues

Intersegment
Revenues (Expense),
net

Direct
Revenues

Third Party
Revenues

Intersegment
Revenues
(Expense),
net

Direct
Revenues

Environmental Services

$

723,147

$

950

$

724,097

$

612,720

$

(126

)

$

612,594

Safety-Kleen Sustainability Solutions

203,232

(950

)

202,282

97,224

126

97,350

Corporate Items

79

79

56

56

Total

$

926,458

$

$

926,458

$

710,000

$

$

710,000

For the Six Months Ended

Revenue

June 30, 2021

June 30, 2020

Third Party
Revenues

Intersegment
Revenues
(Expense),
net

Direct
Revenues

Third Party
Revenues

Intersegment
Revenues
(Expense),
net

Direct
Revenues

Environmental Services

$

1,376,025

$

2,674

$

1,378,699

$

1,317,756

$

30

$

1,317,786

Safety-Kleen Sustainability Solutions

358,423

(2,674

)

355,749

250,661

(30

)

250,631

Corporate Items

158

158

146

146

Total

$

1,734,606

$

$

1,734,606

$

1,568,563

$

$

1,568,563

For the Three Months Ended

For the Six Months Ended

Adjusted EBITDA

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Environmental Services

$

176,041

$

176,241

$

316,295

$

322,099

Safety-Kleen Sustainability Solutions

63,314

8,431

94,946

32,635

Corporate Items

(51,584

)

(46,406

)

(94,019

)

(90,587

)

Total

$

187,771

$

138,266

$

317,222

$

264,147

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804005247/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

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