- Grows Q2 Revenue to $1.4 Billion on Continued Strength in
Environmental Services
- Generates Q2 Net Income of $115.8 Million, or EPS and Adjusted
EPS of $2.13
- Delivers Q2 Adjusted EBITDA of $287.5 Million
- Reiterates 2023 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 second quarter
ended June 30, 2023.
“Clean Harbors delivered a strong second-quarter performance,
highlighted by the continued momentum of the Environmental Services
(ES) segment,” said Eric Gerstenberg, Co-Chief Executive Officer.
“The segment’s Adjusted EBITDA margin improved by 140 basis points
through a combination of revenue growth, pricing initiatives and
productivity gains. The profitable growth in our ES segment partly
offset decreased revenue and profitability in our Safety-Kleen
Sustainability Solutions (SKSS) segment, which declined due to base
oil market conditions. At the same time, we posted the best
second-quarter safety results in the Company’s history, registering
a Total Recordable Incident Rate (TRIR) of 0.68 to conclude a great
first half in safety.”
Second-Quarter Results
Revenues increased 3% to $1.40 billion from $1.36 billion in the
same period of 2022. Income from operations was $189.8 million,
compared to $211.2 million in the second quarter of 2022.
Net income and adjusted net income were $115.8 million, or $2.13
per diluted share. This compared with net income of $148.2 million,
or $2.71 per diluted share, for the same period in 2022. Adjusted
for certain items in the 2022 period, adjusted net income in the
second quarter of 2022 was $133.1 million, or $2.44 per diluted
share. (See reconciliation tables below).
Adjusted EBITDA (see description below) was $287.5 million
compared with $309.1 million in the same period of 2022.
Q2 2023 Segment Review
“Healthy demand across our ES segment yielded a 13% increase in
Adjusted EBITDA with a 26% margin, reflecting a record level of
revenue throughout our service businesses, supported by our
disposal and recycling network,” said Gerstenberg. “In Q2, we
capitalized on a busy spring turnaround season and solid initial
contributions from our recent Thompson Industrial acquisition,
leading to revenue growth of 11% in Industrial Services. Revenue in
Safety-Kleen Environmental Services grew 16%, while Field Services
revenue was up 7%. Within Technical Services, our incineration
utilization improved sequentially to 84%, but was down from a year
ago due to a higher number of maintenance days. We continued to see
a healthy mix of waste volumes as our average incineration price
was up 8% in the quarter while our landfill average price per ton
increased 21% on strong base business.”
“During the quarter the SKSS segment set operational records
collecting 64 million gallons of oil and achieving our highest Q2
base oil sales volume,” said Mike Battles, Co-Chief Executive
Officer. “However, financial results in the segment were below our
expectations due to unfavorable macro supply dynamics and pricing
headwinds in the base oil market that included an unexpected June
price decline and lower spot pricing throughout the quarter. To
address the compression in our re-refining spread, we rapidly
shifted from a pay-for-oil (PFO) to a charge-for-oil (CFO) pricing
model while still collecting a record amount of used oil. We also
maximized plant production, optimizing the economics of the
business while navigating the current environment.”
Business Outlook and Financial Guidance
“We remain on track to hit our financial targets in 2023 as
momentum in our ES segment continues to offset the decline in
SKSS,” said Gerstenberg. “Demand within our key ES businesses has
not slowed, and underlying market conditions remain positive.
Industrial Services continues to be a meaningful contributor to our
2023 success, and we expect a healthy fall turnaround season.
Within our disposal network, our record backlog grew again in Q2,
which positions us well for the coming quarters. The buildout of
our new incinerator in Kimball, Nebraska is going well as we
continue to target an early 2025 opening. The project pipeline
within the ES segment shows no sign of slowing. The pace of
reshoring remains robust, and government infrastructure spending is
just starting to register. We are also seeing customer interest in
projects related to the remediation of ‘forever chemicals’ (PFAS)
increase. We expect the recent authorization of PFAS incineration
by the Department of Defense will support our growth in the coming
years. Overall, we continue to anticipate a record year in our ES
segment.”
“Within SKSS, we expect challenging market conditions to extend
throughout the remainder of the year given that the summer driving
season did not stabilize pricing due to global oversupply and
destocking efforts by U.S. customers. Therefore, we expect base oil
and blended pricing to remain under pressure in the back half of
2023. Our near-term focus will continue to be on effectively
managing waste oil collection to supply our plants with the lowest
cost gallons possible and running our plants efficiently, while
continuing to grow overall sales volumes. Even though we are
lowering our 2023 expectations for the SKSS segment again due to
current market factors, we fully expect that reduction to be offset
by profitable growth in ES,” Battles concluded.
For the third quarter of 2023, Clean Harbors expects its ES
segment to continue to grow and perform well. Overall, the Company
expects Adjusted EBITDA to decrease 7% to 9% from the prior year
related to the difficult year-over-year comparison in its SKSS
segment.
For full-year 2023, Clean Harbors expects:
- Adjusted EBITDA in the range of $1.02 billion to $1.06 billion
or a midpoint of $1.04 billion. This range is based on anticipated
GAAP net income in the range of $372 million to $408 million;
and
- Adjusted free cash flow in the range of $305 million to $345
million, or a midpoint of $325 million, which includes $85 million
to $90 million of spend related to the Kimball incinerator. This
range is based on anticipated net cash from operating activities in
the range of $705 million to $765 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 six months ended June 30, 2023 and 2022
(in thousands, except percentages):
For the Three Months
Ended
For the Six Months
Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Net income
$
115,766
$
148,157
$
188,167
$
193,471
Accretion of environmental liabilities
3,486
3,197
6,893
6,353
Stock-based compensation
4,500
6,835
10,518
12,547
Depreciation and amortization
89,697
87,868
174,455
172,166
Other expense (income), net
1,283
(1,265
)
1,167
(1,969
)
Loss on early extinguishment of debt
—
—
2,362
—
Gain on sale of business
—
(8,864
)
—
(8,864
)
Interest expense, net of interest
income
30,072
26,256
50,704
51,273
Provision for income taxes
42,702
46,886
68,378
64,352
Adjusted EBITDA
$
287,506
$
309,070
$
502,644
$
489,329
Adjusted EBITDA Margin
20.6
%
22.8
%
18.6
%
19.4
%
This press release includes a discussion of net income and
earnings per share adjusted for the loss on early extinguishment of
debt, gain on sale of business 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 six months ended June 30, 2023 and 2022
(in thousands, except per share amounts):
For the Three Months
Ended
For the Six Months
Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Adjusted net income
Net income
$
115,766
$
148,157
$
188,167
$
193,471
Loss on early extinguishment of debt
—
—
2,362
—
Gain on sale of business
—
(8,864
)
—
(8,864
)
Tax-related valuation allowances and
other*
—
(6,209
)
(653
)
(6,095
)
Adjusted net income
$
115,766
$
133,084
$
189,876
$
178,512
Adjusted earnings per share
Earnings per share
$
2.13
$
2.71
$
3.46
$
3.54
Loss on early extinguishment of debt
—
—
0.04
—
Gain on sale of business
—
(0.16
)
—
(0.16
)
Tax-related valuation allowances and
other*
—
(0.11
)
(0.01
)
(0.11
)
Adjusted earnings per share
$
2.13
$
2.44
$
3.49
$
3.27
* Other amounts include ($0.7) million or
($0.01) per share of tax impacts from the loss on early
extinguishment of debt for the six months ended June 30, 2023.
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. 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, 2023 and 2022 (in thousands):
For the Three Months
Ended
For the Six Months
Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Adjusted free cash flow
Net cash from operating activities
$
207,565
$
170,599
$
235,573
$
131,970
Additions to property, plant and
equipment
(122,612
)
(77,734
)
(204,298
)
(148,042
)
Proceeds from sale and disposal of fixed
assets
1,089
1,703
2,944
3,023
Adjusted free cash flow
$
86,042
$
94,568
$
34,219
$
(13,049
)
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, 2023
Projected GAAP net income
$372
to
$408
Adjustments:
Accretion of environmental liabilities
14
to
13
Stock-based compensation
20
to
23
Depreciation and amortization
360
to
350
Loss on early extinguishment of debt
2
to
2
Interest expense, net
115
to
110
Provision for income taxes
137
to
154
Projected Adjusted EBITDA
$1,020
to
$1,060
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, 2023
Projected net cash from operating
activities
$705
to
$765
Additions to property, plant and
equipment
(410)
to
(430)
Proceeds from sale and disposal of fixed
assets
10
to
10
Projected adjusted free cash flow
$305
to
$345
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 877.709.8155 or 201.689.8881 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,
manufacturing and refining, 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, 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, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Revenues
$
1,397,900
$
1,356,312
$
2,705,287
$
2,525,421
Cost of revenues: (exclusive of items
shown separately below)
947,512
898,469
1,879,026
1,741,858
Selling, general and administrative
expenses
167,382
155,608
334,135
306,781
Accretion of environmental liabilities
3,486
3,197
6,893
6,353
Depreciation and amortization
89,697
87,868
174,455
172,166
Income from operations
189,823
211,170
310,778
298,263
Other (expense) income, net
(1,283
)
1,265
(1,167
)
1,969
Loss on early extinguishment of debt
—
—
(2,362
)
—
Gain on sale of business
—
8,864
—
8,864
Interest expense, net
(30,072
)
(26,256
)
(50,704
)
(51,273
)
Income before provision for income
taxes
158,468
195,043
256,545
257,823
Provision for income taxes
42,702
46,886
68,378
64,352
Net income
$
115,766
$
148,157
$
188,167
$
193,471
Earnings per share:
Basic
$
2.14
$
2.73
$
3.48
$
3.56
Diluted
$
2.13
$
2.71
$
3.46
$
3.54
Shares used to compute earnings per share
- Basic
54,092
54,318
54,084
54,362
Shares used to compute earnings per share
- Diluted
54,448
54,597
54,422
54,639
CLEAN HARBORS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, 2023
December 31, 2022
Current assets:
Cash and cash equivalents
$
238,776
$
492,603
Short-term marketable securities
87,346
62,033
Accounts receivable, net
981,233
964,603
Unbilled accounts receivable
122,679
107,010
Inventories and supplies
325,882
324,994
Prepaid expenses and other current
assets
92,559
82,518
Total current assets
1,848,475
2,033,761
Property, plant and equipment, net
2,082,693
1,980,302
Other assets:
Operating lease right-of-use assets
181,243
166,181
Goodwill
1,288,291
1,246,878
Permits and other intangibles, net
626,320
620,782
Other
74,315
81,803
Total other assets
2,170,169
2,115,644
Total assets
$
6,101,337
$
6,129,707
Current liabilities:
Current portion of long-term debt
$
10,000
$
10,000
Accounts payable
374,438
446,629
Deferred revenue
105,327
94,094
Accrued expenses and other current
liabilities
348,857
396,716
Current portion of closure, post-closure
and remedial liabilities
21,802
23,123
Current portion of operating lease
liabilities
53,991
49,532
Total current liabilities
914,415
1,020,094
Other liabilities:
Closure and post-closure liabilities, less
current portion
108,522
105,596
Remedial liabilities, less current
portion
102,560
106,372
Long-term debt, less current portion
2,294,306
2,414,828
Operating lease liabilities, less current
portion
129,058
119,259
Deferred tax liabilities
346,328
350,389
Other long-term liabilities
96,262
90,847
Total other liabilities
3,077,036
3,187,291
Total stockholders’ equity, net
2,109,886
1,922,322
Total liabilities and stockholders’
equity
$
6,101,337
$
6,129,707
CLEAN HARBORS, INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
For the Six Months
Ended
June 30, 2023
June 30, 2022
Cash flows from operating activities:
Net income
$
188,167
$
193,471
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization
174,455
172,166
Allowance for doubtful accounts
1,209
6,927
Amortization of deferred financing costs
and debt discount
2,718
3,135
Accretion of environmental liabilities
6,893
6,353
Changes in environmental liability
estimates
387
1,232
Deferred income taxes
(356
)
2,226
Other expense (income), net
1,167
(1,969
)
Stock-based compensation
10,518
12,547
Loss on early extinguishment of debt
2,362
—
Gain on sale of business
—
(8,864
)
Environmental expenditures
(16,323
)
(7,028
)
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable and unbilled accounts
receivable
(5,659
)
(263,584
)
Inventories and supplies
(1,111
)
(23,888
)
Other current and non-current assets
(22,749
)
(25,504
)
Accounts payable
(78,139
)
45,748
Other current and long-term
liabilities
(27,966
)
19,002
Net cash from operating activities
235,573
131,970
Cash flows used in investing
activities:
Additions to property, plant and
equipment
(204,298
)
(148,042
)
Proceeds from sale and disposal of fixed
assets
2,944
3,023
Acquisitions, net of cash acquired
(120,636
)
(68,766
)
Proceeds from sale of business, net of
transaction costs
—
17,486
Additions to intangible assets including
costs to obtain or renew permits
(1,114
)
(836
)
Purchases of available-for-sale
securities
(74,451
)
(23,182
)
Proceeds from sale of available-for-sale
securities
50,290
32,835
Net cash used in investing activities
(347,265
)
(187,482
)
Cash flows used in financing
activities:
Change in uncashed checks
2,392
475
Tax payments related to withholdings on
vested restricted stock
(4,335
)
(2,571
)
Repurchases of common stock
(8,001
)
(33,694
)
Deferred financing costs paid
(6,346
)
(321
)
Payments on finance leases
(7,588
)
(6,552
)
Principal payments on debt
(618,975
)
(8,768
)
Proceeds from issuance of debt
500,000
—
Borrowing from revolving credit
facility
114,000
—
Payment on revolving credit facility
(114,000
)
—
Net cash used in financing activities
(142,853
)
(51,431
)
Effect of exchange rate change on cash
718
(1,001
)
Decrease in cash and cash equivalents
(253,827
)
(107,944
)
Cash and cash equivalents, beginning of
period
492,603
452,575
Cash and cash equivalents, end of
period
$
238,776
$
344,631
Supplemental information:
Cash payments for interest and income
taxes:
Interest paid
$
49,257
$
48,104
Income taxes paid, net of refunds
92,494
29,307
Non-cash investing activities:
Property, plant and equipment accrued
26,427
21,156
Remedial liability assumed in acquisition
of property, plant and equipment
—
13,073
ROU assets obtained in exchange for
operating lease liabilities
38,474
20,686
ROU assets obtained in exchange for
finance lease liabilities
13,992
7,646
Supplemental Segment Data (in thousands)
For the Three Months
Ended
Revenue
June 30, 2023
June 30, 2022
Third-Party Revenues
Intersegment Revenues
(Expenses), net
Direct Revenues
Third-Party Revenues
Intersegment Revenues
(Expenses), net
Direct Revenues
Environmental Services
$
1,161,482
$
10,554
$
1,172,036
$
1,084,506
$
6,237
$
1,090,743
Safety-Kleen Sustainability Solutions
236,302
(10,554
)
225,748
271,727
(6,237
)
265,490
Corporate Items
116
—
116
79
—
79
Total
$
1,397,900
$
—
$
1,397,900
$
1,356,312
$
—
$
1,356,312
For the Six Months
Ended
Revenue
June 30, 2023
June 30, 2022
Third-Party Revenues
Intersegment Revenues
(Expenses), net
Direct Revenues
Third-Party Revenues
Intersegment Revenues
(Expenses), net
Direct Revenues
Environmental Services
$
2,222,464
$
20,313
$
2,242,777
$
2,025,304
$
12,884
$
2,038,188
Safety-Kleen Sustainability Solutions
482,600
(20,313
)
462,287
499,966
(12,884
)
487,082
Corporate Items
223
—
223
151
—
151
Total
$
2,705,287
$
—
$
2,705,287
$
2,525,421
$
—
$
2,525,421
For the Three Months
Ended
For the Six Months
Ended
Adjusted EBITDA
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Environmental Services
$
305,622
$
269,341
$
533,967
$
452,943
Safety-Kleen Sustainability Solutions
53,415
97,010
94,878
148,887
Corporate Items
(71,531
)
(57,281
)
(126,201
)
(112,501
)
Total
$
287,506
$
309,070
$
502,644
$
489,329
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802780583/en/
Eric J. Dugas 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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