Exhibit 99.1

 

Press Release

 

Clean Harbors Announces Third-Quarter 2016 Financial Results

 

·            Reports Revenues of $729.5 Million Reflecting U.S. Industrial Slowdown and Continued Energy Weakness

 

·            Announces GAAP Net Loss of $10.3 Million, or $0.18 Per Share, including a Non-Cash Goodwill Impairment Charge of $34.0 Million in Lodging Segment and an After-Tax Gain of $15.1 Million on Sale of Catalyst Business

 

·            Achieves Adjusted Net Income of $9.3 Million, or EPS of $0.16

 

·            Reports Adjusted EBITDA of $126.7 Million; Margin of 17.4%

 

·            Achieves Gross Margin of 32.6% Reflecting Cost Reduction Efforts

 

·            Revises 2016 Adjusted EBITDA Guidance Range

 

NORWELL, Mass. — November 2, 2016 — 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 third quarter ended September 30, 2016.

 

Revenues for the third quarter of 2016 were $729.5 million, compared with $893.4 million in the same period a year ago.  Revenues in the third quarter of 2015 included approximately $145 million related to substantial emergency response activity.  GAAP income from operations was $16.8 million in the third quarter of 2016, which included a non-cash goodwill impairment charge of $34.0 million related to the Lodging Services segment.  Income from operations in the third quarter of 2015 was $94.0 million.  Adjusted income from operations in the third quarter of 2016, excluding the impairment charge, was $50.8 million.

 

GAAP net loss for the third quarter of 2016 was $10.3 million, or $0.18 per share, compared with net income of $40.2 million, or $0.69 per diluted share, in the third quarter of 2015. The third quarter 2016 net loss included the non-cash goodwill impairment charge, an after-tax gain of $15.1 million related to the divestiture of the Company’s Catalyst Services business and the effects of not recognizing income tax benefits associated with pre-tax losses generated by certain of the Company’s Canadian subsidiaries.  Excluding these items, the Company reported adjusted net income of $9.3 million, or $0.16 per diluted share, in the third quarter of 2016.

 

Net (loss) income and adjusted net income results for the third quarters of 2016 and 2015 included pre-tax severance and integration costs of $5.8 million and $2.5 million, respectively.

 

Adjusted EBITDA (see description below) in the third quarter of 2016 was $126.7 million, compared with $165.6 million in the same period of 2015, which included approximately $35 million related to emergency response activity.

 

Comments on the Third Quarter

 

“Despite strong contributions from our Safety-Kleen segments, our third-quarter results were below expectations due to weak industrial and energy market conditions, as well as significant severance and integration costs that further dampened our profitability,” said Alan S. McKim, Chairman, President and Chief Executive Officer.  “SK Environmental Services delivered its ninth consecutive quarter of increased profitability, with Adjusted EBITDA growth of 18%.  At the same time, Kleen Performance Products more

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

than doubled its profitability from that of the second quarter and was up 88% from the prior year’s third quarter as we continued to effectively manage our spread.

 

“Within our Technical Services and Industrial and Field Services segments, we continued to see the combined effects of the U.S. industrial slowdown and the prolonged weakness of the energy sector.  While incineration utilization was a healthy 90%, our landfill volumes fell 49% from those of the prior year.  Customers remained reluctant to spend on large-scale projects, and we saw lower waste volumes from some large-quantity generators.  This market slowdown, particularly in Western Canada, placed further pressure on our Oil & Gas Field Services and Lodging Services segments.

 

“During the quarter, we recorded our highest gross margin since 2008 as a result of the success of our comprehensive cost reduction efforts,” McKim said.

 

Growth Initiatives and Executive Hires

 

“In light of the ongoing softness in some of our key markets, we proactively are taking steps to reinvigorate our top-line growth and improve our profitability,” McKim said. “The third quarter was a period of considerable activity for the Company. We completed a series of acquisitions designed to support our environmental business and direct sales of Safety Kleen’s blended products; successfully divested our catalyst business; continued to dramatically lower our cost structure; readied our new Arkansas incinerator for commercial opening by year-end; prepared for the national roll-out of our closed loop offering of renewable lubricants by year-end; and launched key initiatives in the areas of healthcare services and daylighting.

 

“We added strong executives with extensive experience to support this broad range of initiatives and ensure their success.  These individuals, who joined the Company in recent months, are distinguished by their impressive track records across sales, customer service, operations and cost reduction at industry leaders such as Univar, Waste Management, Republic Services and McKinsey.  Collectively, they will help drive our ambitious strategy for profitable growth in 2017 and beyond,” said McKim.

 

Business Outlook and Financial Guidance

 

“Looking ahead, we expect that the challenges we faced this year from the industrial slowdown and the lack of a recovery in energy will remain in the fourth quarter.  We anticipate that customer spending on major projects will stay somewhat constrained through year-end.  Therefore, we anticipate that our Adjusted EBITDA in the fourth quarter will be flat to up 10% from the prior year, primarily supported by cost actions.  We do, however, believe we are nearing the bottom of this industry downturn.  Within the macro environment, U.S. industrial production recently turned positive, and energy markets have begun to stabilize alongside energy prices.  Internally, we are excited about the tangible momentum in both of our Safety-Kleen segments.  The addition of the new incinerator will provide a significant boost to Technical Services in the years ahead, and we remain confident about our prospects to fill that facility.

 

“As an organization, we are aggressively responding to the low growth energy and industrial markets with the recent launch of multiple strategic initiatives such as the closed loop, regulated medical waste and daylighting.  We continue to invest our resources in areas with the highest long-term growth potential.  We also are intensifying our cost reduction efforts as we right-size our expense structure through acquisition synergies, transportation and network optimization, and internalizing more third-party spending until our end markets

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

rebound to more normalized levels of activity.  As a result of these actions, we expect significant Adjusted EBITDA growth from 2016 to 2017.  While we need to complete our year-end budget process to establish our 2017 Adjusted EBITDA range, we expect the mid-point of that range to be in the high $400s,” McKim concluded.

 

Based on its year-to-date financial performance and current market conditions, Clean Harbors updated its 2016 annual Adjusted EBITDA guidance.  The Company now expects to deliver Adjusted EBITDA in 2016 in the range of $400 million to $410 million, compared with its prior guidance of $430 million to $450 million.  On a GAAP basis, the Company’s guidance is based on a 2016 net loss in the range of $38 million to $51 million.  Adjusted net (loss) income for 2016, which includes the recognition of the non-cash tax benefits in Canada and excludes the goodwill impairment and gain on sale, is in the range of an adjusted net loss of $10 million to adjusted net income of $7 million. A reconciliation of the Company’s Adjusted EBITDA guidance and adjusted net income to net (loss) income guidance is included below.

 

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.  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 and the fact that management routinely evaluates the performance of its businesses based upon levels of Adjusted EBITDA.  The Company defines Adjusted EBITDA consistently and in accordance with its existing credit agreement, as described in the following reconciliation showing the differences between reported net (loss) income and Adjusted EBITDA for the three and nine months ended September 30, 2016 and 2015 (in thousands):

 

		For the Three Months Ended:						For the Nine Months Ended:
		September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Net (loss) income		$	(10,255	)	$	40,228		$	(27,160	)	$	43,534
Accretion of environmental liabilities		2,476			2,577			7,529			7,795
Depreciation and amortization		73,360			69,060			215,655			205,189
Goodwill impairment charge		34,013			—			34,013			31,992
Other expense		198			139			737			390
Gain on sale of business		(16,431		)	—			(16,431		)	—
Interest expense, net		21,565			19,017			62,192			57,704
Provision for income taxes		21,725			34,586			27,881			60,402
Adjusted EBITDA		$	126,651		$	165,607		$	304,416		$	407,006

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

This press release includes a discussion of income from operations adjusted for the goodwill impairment charge identified in the reconciliation provided below.  This press release also includes a discussion of net (loss) income and (loss) earnings per share adjusted for the non-cash impact of unbenefited tax losses in Canada, the goodwill impairment charge and gain on sale of business 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 income from operations to adjusted income from operations, net (loss) income to adjusted net income and (loss) earnings per share to adjusted earnings per share for the three and nine months ended September 30, 2016 and 2015 (in thousands, except per share amounts):

 

 

		For the Three Months Ended:						For the Nine Months Ended:
		September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Adjusted income from operations
Income from operations		$	16,802		$	93,970		$	47,219		$	162,030
Goodwill impairment charge		34,013			—			34,013			31,992
Adjusted income from operations		$	50,815		$	93,970		$	81,232		$	194,022
Adjusted net income
Net (loss) income		$	(10,255	)	$	40,228		$	(27,160	)	$	43,534
Goodwill impairment charge, net of $0 taxes		34,013			—			34,013			31,992
Gain on sale of business, net of $1,340 taxes		(15,091		)	—			(15,091		)	—
Unbenefited tax losses		584			—			12,955			—
Adjusted net income		$	9,251		$	40,228		$	4,717		$	75,526
Adjusted earnings per share
(Loss) earnings per share		$	(0.18	)	$	0.69		$	(0.47	)	$	0.74
Goodwill impairment charge, net of $0 taxes		0.59			—			0.59			0.54
Gain on sale of business, net of $1,340 taxes		(0.26		)				(0.26		)
Unbenefited tax losses		0.01			—			0.22			—
Adjusted earnings per share		$	0.16		$	0.69		$	0.08		$	1.28

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

Adjusted EBITDA Guidance Reconciliation

 

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

 

		For the Year Ending December 31, 2016
		Amount
		(In millions)
Projected GAAP net loss		($51	)	to		(38	)
Adjustments:
Accretion of environmental liabilities		11		to		10
Depreciation and amortization		295		to		285
Goodwill impairment charge		34		to		34
Gain on sale		(16	)	to		(16	)
Interest expense, net		84		to		84
Provision for income taxes		43		to		51
Projected Adjusted EBITDA		$400		to		$410

 

An itemized reconciliation between projected net loss and projected adjusted net (loss) income is as follows:

 

		For the Year Ending December 31, 2016
		Amount
		(In millions)
Projected GAAP net loss		($51	)	to		($38	)
Goodwill impairment		34		to		34
Gain on sale		(15	)	to		(15	)
Unbenefited tax losses		22		to		26
Projected adjusted net (loss) income		($10	)	to		$7

 

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 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 of the call.  If you are unable to listen to the live call, the webcast will be archived on the Company’s website.

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

About Clean Harbors

 

Clean Harbors (NYSE: CLH) is North America’s leading provider of environmental, energy and industrial services. The Company serves a diverse customer base, including a majority of the Fortune 500, across the chemical, energy, manufacturing and additional markets, 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 throughout the United States, Canada, 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 future financial and operating results, the Company’s planned carve-out 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.

 

Contacts

 

Investors:	Media:
Jim Buckley	Eric Kraus
SVP Investor Relations	EVP Corporate Communications & Public Affairs
Clean Harbors, Inc.	Clean Harbors, Inc.
781.792.5100	781.792.5100
Buckley.James@cleanharbors.com	Kraus.Eric@cleanharbors.com

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · 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, 2016			September 30, 2015			September 30, 2016			September 30,  2015
Revenues		$	729,520		$	893,366		$	2,063,113		$	2,562,093
Cost of revenues (exclusive of items shown separately below)		491,915			634,646			1,436,196			1,833,841
Selling, general and administrative expenses		110,954			93,113			322,501			321,246
Accretion of environmental liabilities		2,476			2,577			7,529			7,795
Depreciation and amortization		73,360			69,060			215,655			205,189
Goodwill impairment charge		34,013			—			34,013			31,992
Income from operations		16,802			93,970			47,219			162,030
Other expense		(198		)	(139		)	(737		)	(390		)
Gain on sale of business		16,431			—			16,431			—
Interest expense, net		(21,565		)	(19,017		)	(62,192		)	(57,704		)
Income before provision for income taxes		11,470			74,814			721			103,936
Provision for income taxes		21,725			34,586			27,881			60,402
Net (loss) income		$	(10,255	)	$	40,228		$	(27,160	)	$	43,534
(Loss) earnings per share:
Basic		$	(0.18	)	$	0.69		$	(0.47	)	$	0.74
Diluted		$	(0.18	)	$	0.69		$	(0.47	)	$	0.74
Shares used to compute (loss) earnings per share — Basic		57,487			58,161			57,575			58,799
Shares used to compute (loss) earnings per share — Diluted		57,487			58,268			57,575			58,898

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

		September 30, 2016			December 31, 2015
Current assets:
Cash and cash equivalents		$	257,857		$	184,708
Accounts receivable, net		512,376			496,004
Unbilled accounts receivable		41,542			25,940
Deferred costs		19,970			18,758
Inventories and supplies		177,288			149,521
Prepaid expenses and other current assets		40,898			46,265
Total current assets		1,049,931			921,196
Property, plant and equipment, net		1,648,571			1,532,467
Other assets:
Deferred financing costs		1,197			1,847
Goodwill		470,633			453,105
Permits and other intangibles, net		507,337			506,818
Other		34,944			15,995
Total other assets		1,014,111			977,765
Total assets		$	3,712,613		$	3,431,428
Current liabilities:
Accounts payable		$	226,776		$	241,183
Deferred revenue		66,023			61,882
Accrued expenses		226,080			193,660
Current portion of closure, post-closure and remedial liabilities		20,217			20,395
Total current liabilities		539,096			517,120
Other liabilities:
Closure and post-closure liabilities, less current portion		56,510			49,020
Remedial liabilities, less current portion		114,921			118,826
Long-term obligations		1,632,577			1,382,543
Deferred taxes, unrecognized tax benefits and other long-term liabilities		268,564			267,637
Total other liabilities		2,072,572			1,818,026
Total stockholders’ equity, net		1,100,945			1,096,282
Total liabilities and stockholders’ equity		$	3,712,613		$	3,431,428

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

Supplemental Segment Data (in thousands)

 

		For the Three Months Ended:
		September 30, 2016									September 30, 2015
Revenue		Third Party Revenues			Intersegment Revenues (Expense), net			Direct Revenues			Third Party Revenues			Intersegment Revenues (Expense), net			Direct Revenues
Technical Services		$	232,482		$	39,287		$	271,769		$	253,069		$	35,325		$	288,394
Industrial and Field Services		162,118			(12,766		)	149,352			307,226			(7,286		)	299,940
Kleen Performance Products		102,318			(9,761		)	92,557			100,827			(23,750		)	77,077
SK Environmental Services		194,764			(18,954		)	175,810			171,832			(5,945		)	165,887
Lodging Services		15,520			252			15,772			13,507			773			14,280
Oil and Gas Field Services		22,197			2,508			24,705			46,788			1,194			47,982
Corporate Items		121			(566		)	(445		)	117			(311		)	(194		)
Total		$	729,520		$	—		$	729,520		$	893,366		$	—		$	893,366

 

		For the Nine Months Ended:
		September 30, 2016									September 30, 2015
Revenue		Third Party Revenues			Intersegment Revenues (Expense), net			Direct Revenues			Third Party Revenues			Intersegment Revenues (Expense), net			Direct Revenues
Technical Services		$	680,717		$	110,764		$	791,481		$	741,419		$	110,923		$	852,342
Industrial and Field Services		437,546			(29,590		)	407,956			807,423			(25,400		)	782,023
Kleen Performance Products		256,572			(26,769		)	229,803			296,738			(63,437		)	233,301
SK Environmental Services		565,186			(59,192		)	505,994			508,392			(26,326		)	482,066
Lodging Services		47,583			688			48,271			68,782			2,026			70,808
Oil and Gas Field Services		73,445			5,954			79,399			138,992			4,729			143,721
Corporate Items		2,064			(1,855		)	209			347			(2,515		)	(2,168		)
Total		$	2,063,113		$	—		$	2,063,113		$	2,562,093		$	—		$	2,562,093

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com

 

 

		For the Three Months Ended:						For the Nine Months Ended:
Adjusted EBITDA		September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Technical Services		$	72,333		$	79,048		$	201,622		$	219,257
Industrial and Field Services		18,579			62,460			40,643			145,850
Kleen Performance Products		22,803			12,123			37,358			23,471
SK Environmental Services		47,250			40,096			127,984			108,540
Lodging Services		4,104			1,827			8,145			12,589
Oil and Gas Field Services		(4,425		)	1,579			(10,026		)	800
Corporate Items		(33,993		)	(31,526		)	(101,310		)	(103,501		)
Total		$	126,651		$	165,607		$	304,416		$	407,006

 

Clean Harbors · 42 Longwater Drive · PO Box 9149 · Norwell, Massachusetts 02061-9149 · 800.282.0058 · www.cleanharbors.com