Clean Harbors' First Quarter Profits Double

Date: May 4, 2011

Source: Clean Harbors, Inc.

Clean Harbors Reports First-Quarter 2011 Financial Results

  • Broad-based Contributions Fuel Record Q1 Results

  • Q1 Revenue Increases 23% to $435 Million

  • Q1 Net Income More Than Doubles to $22.7 Million

  • EBITDA Grows to $67.6 Million on Higher Volume and Pricing

  • Company Increases 2011 Guidance

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 first quarter ended March 31, 2011.

Revenues increased 23% to a first-quarter record of $435.0 million from $354.9 million in the same period in 2010. Income from operations increased 68% to $39.7 million from $23.6 million in the first quarter of 2010.

First quarter 2011 net income rose 118% to $22.7 million, or $0.86 per diluted share, from $10.4 million, or $0.40 per diluted share, in the first quarter of 2010. First quarter 2011 other income includes a $3.4 million pre-tax benefit related to compensation for the release by eminent domain of certain rail rights. EBITDA (see description below) increased 38% to $67.6 million from $49.0 million in the first quarter of 2010.

The Company concluded the first quarter with cash and marketable securities of $535.9 million, compared with $305.4 million at December 31, 2010. The increase in cash is primarily the result of the Company's $250 million senior secured notes offering in March 2011.

Comments on the First Quarter

"Our first-quarter performance reflects broad-based growth across all of our segments," said Alan S. McKim, Chairman and Chief Executive Officer. "Within our Environmental business, we achieved revenue growth of nearly 30% at our TSDFs (Treatment, Storage and Disposal Facilities), while revenue at our wastewater treatment plants increased more than 50% as a result of refinery and frac water-related volumes. Utilization at our incineration facilities and landfills was steady in what is typically the Company's seasonally weakest quarter. Across our network, momentum continued from the large-scale project work that began to accelerate in late 2010, resulting in more than 25% growth in our Field Services segment. Within our Energy and Industrial business, the prolonged cold weather in Western Canada supported an extended period of drilling activity. Investments in U.S. gas and oil production also continued, driving steady demand for our services. In particular, lodging and exploration each generated exceptionally strong year-over-year results."

"We leveraged our extensive network of assets to grow our first-quarter 2011 EBITDA by 38% - a far greater rate than our revenues," McKim said. "We increased our EBITDA margin year-over-year by more than 170 basis points to 15.5% as we successfully implemented pricing initiatives and tightly managed overall costs. In addition, we were effective at passing through higher fuel expenses in the quarter."

Acquisition Activity

"We recently signed a definitive agreement to acquire Peak Energy Services of Calgary - a transaction that will significantly expand our presence in oil and natural gas drilling and production support. During the first quarter, we also agreed to acquire another Canadian company, Badger Daylighting. As we announced last week, we did not receive the required 66 2/3 percent of the votes cast by Badger shareholders, despite the support of Badger's Board of Directors, executive management and two leading independent shareholder advisory firms. But that decision has not diminished our intention to further expand through acquisitions. During the first quarter, we successfully raised $250 million in senior secured debt at favorable rates. With more than a half billion dollars in cash and cash equivalents on our balance sheet and the Peak transaction underway, we are moving forward on additional opportunities in our active acquisition pipeline."

The acquisition of Peak Energy Services for approximately CAD $196 million is expected to be completed during the second quarter of 2011. The transaction remains subject to approval by regulators and Peak shareholders, as well as other customary closing conditions. Each of the directors and officers of Peak and Deans Knight Capital Management Ltd., collectively holding 53.6% of the Peak shares, have entered into agreements in which they have agreed to vote their shares in favor of the acquisition at the Peak shareholders' meeting, now scheduled to be held on May 25, 2011.

Non-GAAP Results

Clean Harbors reports EBITDA results, which are non-GAAP financial measures, as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP) and believes that such information provides additional useful information to investors since the Company's loan covenants are based upon levels of EBITDA achieved. The Company defines EBITDA in accordance with its existing credit agreement, as described in the following reconciliation showing the differences between reported net income and EBITDA for the first quarter of 2011 and 2010 (in thousands):


For the three months ended:
31-Mar-11 31-Mar-10
 Net income    $22,730    $10,430 
 Accretion of environmental liabilities    2,389    2,702 
 Depreciation and amortization    25,460    22,674 
 Other income    (2,899)    (446) 
 Interest expense, net    6,478    6,928 
 Provision for income taxes    13,433    7,089 
 Income from discontinued operations, net of tax    —    (382) 
 EBITDA    $67,591    $48,995 


Business Outlook and Financial Guidance

"We concluded 2010 with strong momentum that has carried into fiscal 2011," McKim said. "In the first quarter, we recorded double-digit year-over-year increases in all four of our newly aligned reporting segments - Technical Services, Field Services, Industrial Services and Oil & Gas Field Services. Looking ahead, we remain encouraged about our prospects for profitable growth. The underlying economic and outsourcing trends remain favorable for Clean Harbors. Our comprehensive efforts to reduce our cost infrastructure - even while investing heavily in our business - have proven to be effective as we continue to expand our margins. In addition, our acquisition pipeline remains active and we are in the process of evaluating a number of potential opportunities."

Based on its first-quarter performance and current market conditions, Clean Harbors is increasing its 2011 annual revenue and EBITDA guidance. The Company currently expects 2011 revenues in the range of $1.62 billion to $1.67 billion, up from its previous revenue guidance of $1.54 billion to $1.59 billion. For 2011, the Company now expects EBITDA in the range of $275 million to $284 million, an increase from its previous guidance of $262 million to $270 million. This guidance is exclusive of any potential future acquisitions, including the Company's planned purchase of Peak Energy Services.

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, Chairman, President and Chief Executive Officer Alan S. McKim and Executive Vice President and Chief Financial Officer James M. Rutledge will discuss Clean Harbors' financial results, business outlook and growth strategy.

Investors who wish to listen to the webcast should log onto The live call also can be accessed by dialing 877.709.8155 or 201.689.8881 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.

About Clean Harbors

Clean Harbors is the leading provider of environmental, energy and industrial services throughout North America. The Company serves more than 50,000 customers, including a majority of the Fortune 500 companies, thousands of smaller private entities and numerous federal, state, provincial and local governmental agencies.

Headquartered in Norwell, Massachusetts, Clean Harbors has more than 175 locations, including over 50 waste management facilities, throughout North America in 36 U.S. states, seven Canadian provinces, Mexico and Puerto Rico. The Company also operates international locations in Bulgaria, China, Singapore, Sweden, Thailand and the United Kingdom. For more information, visit

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 the Company's business outlook and financial guidance 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 the Company's most recently filed Form 10-K and Form 10-Q. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements other than through its various filings with the Securities and Exchange Commission, which may be viewed at

For more information, contact:
Investor Relations
Clean Harbors, Inc.

Jim Buckley
Executive Vice President
Sharon Merrill Associates, Inc.


(in thousands)


    March 31,
  December 31,
Current assets:          
Cash and cash equivalents   $ 531,763   $ 302,210  
Marketable securities   4,143   3,174  
Accounts receivable, net of allowances
aggregating $18,813 and $23,704, respectively
  347,532   332,678  
Unbilled accounts receivable   16,891   19,117  
Deferred costs   6,359   6,891  
Prepaid expenses and other current assets   30,007   28,939  
Supplies inventories   43,817   44,546  
Deferred tax assets   17,364   14,982  
Total current assets   997,876   752,537  
Property, plant and equipment:          
Land   32,751   31,654  
Asset retirement costs (non-landfill)   2,249   2,242  
Landfill assets   51,146   54,519  
Buildings and improvements   148,913   147,285  
Camp equipment   70,987   62,717  
Vehicles   176,983   162,397  
Equipment   562,446   537,937  
Furniture and fixtures   2,600   2,293  
Construction in progress   38,173   33,005  
    1,086,248   1,034,049  
Less—accumulated depreciation and amortization   402,964   378,655  
Total property, plant and equipment, net   683,284   655,394  
Other assets:          
Long-term investments   5,379   5,437  
Deferred financing costs   12,941   7,768  
Goodwill   61,786   60,252  
Permits and other intangibles, net of accumulated
amortization of $63,996 and $60,633, respectively
  113,650   114,400  
Other   5,728   6,687  
Total other assets   199,484   194,544  
Total assets   $ 1,880,644   1,602,475  


(in thousands)


    March 31,
  December 31,
Current liabilities:          
Current portion of capital lease obligations   $ 7,214   $ 7,954  
Accounts payable   135,998   136,978  
Deferred revenue   28,500   30,745  
Accrued expenses   95,847   116,089  
Current portion of closure, post-closure and remedial liabilities   14,761   14,518  
Total current liabilities   282,320   306,284  
Other liabilities:          
Closure and post-closure liabilities, less current
portion of $5,061 and $5,849, respectively
  29,877   32,830  
Remedial liabilities, less current portion of $9,700
and $8,669, respectively
  128,005   128,944  
Long-term obligations   525,416   264,007  
Capital lease obligations, less current portion   6,216   6,839  
Unrecognized tax benefits and other long-term liabilities   86,940   82,744  
Total other liabilities   776,454   515,364  
Stockholders’ equity:          
Common stock, $.01 par value:          
Authorized 40,000,000 shares; issued and outstanding
26,450,206 and 26,386,196 shares, respectively
  264   264  
Treasury stock   (4,251 ) (2,467 )
Shares held under employee participation plan   (777 ) (777 )
Additional paid-in capital   492,264   488,648  
Accumulated other comprehensive income   67,240   50,759  
Accumulated earnings   267,130   244,400  
Total stockholders’ equity   821,870   780,827  
Total liabilities and stockholders’ equity   $ 1,880,644   $ 1,602,475  


(in thousands except per share amounts)


    Three Months Ended
March 31,
    2011   2010  
Revenues   $ 434,962   $ 354,896  
Cost of revenues (exclusive of items shown
separately below)
  312,577   260,417  
Selling, general and administrative expenses   54,794   45,484  
Accretion of environmental liabilities   2,389   2,702  
Depreciation and amortization   25,460   22,674  
Income from operations   39,742   23,619  
Other income   2,899   446  
Interest expense, net of interest income of
$244 and $102, respectively
  (6,478 ) (6,928 )
Income from continuing operations before
provision for income taxes
  36,163   17,137  
Provision for income taxes   13,433   7,089  
Income from continuing operations   22,730   10,048  
Income from discontinued operations, net of tax     382  
Net income   $ 22,730   $ 10,430  
Earnings per share:          
Basic   $ 0.86   $ 0.40  
Diluted   $ 0.86   $ 0.40  
Weighted average common shares outstanding   26,399   26,251  
Weighted average common shares outstanding
plus potentially dilutive common shares
  26,579   26,371  


(in thousands)


    Three Months Ended March 31,  
    2011   2010  
Cash flows from operating activities:          
Net income   $ 22,730   $ 10,430  
Adjustments to reconcile net income to net
cash from operating activities:
Depreciation and amortization   25,460   22,674  
Allowance for doubtful accounts   205   519  
Amortization of deferred financing costs
and debt discount
  614   732  
Accretion of environmental liabilities   2,389   2,702  
Changes in environmental liability estimates   (260 ) (772 )
Deferred income taxes   486   (227 )
Stock-based compensation   1,744   791  
Excess tax benefit of stock-based compensation   (1,105 ) (151 )
Income tax benefit related to stock option exercises   1,105   151  
Other expense (income)   455   (446 )
Environmental expenditures   (2,340 ) (2,162 )
Changes in assets and liabilities, net of acquisitions          
Accounts receivable   (10,341 ) (20,158 )
Other current assets   2,949   (5,811 )
Accounts payable   (6,876 ) (4,681 )
Other current liabilities   (22,359 ) (11,798 )
Net cash from operating activities   14,856   (8,207 )
Cash flows from investing activities:          
Additions to property, plant and equipment   (34,115 ) (16,552 )
Acquisitions, net of cash acquired   (2,152 )  
Additions to intangible assets, including costs
to obtain or renew permits
  (322 ) (586 )
Proceeds from sales of marketable securities   388    
Proceeds from sales of fixed assets   1,013   828  
Net cash from investing activities   (35,188 ) (16,310 )
Cash flows from financing activities:          
Change in uncashed checks   (5,216 ) (3,203 )
Proceeds from exercise of stock options   39   81  
Remittance of shares, net   (1,784 ) (15 )
Proceeds from employee stock purchase plan   699   574  
Deferred financing costs paid   (5,628 ) (53 )
Payments on capital leases   (1,690 ) (470 )
Distribution of cash earned on employee
participation plan
  (189 ) (148 )
Excess tax benefit of stock-based compensation   1,105   151  
Issuance of senior secured notes, including premium   261,250    
Net cash from financing activities   248,586   (3,083 )
Effect of exchange rate change on cash   1,299   658  
Increase (decrease) in cash and cash equivalents   229,553   (26,942 )
Cash and cash equivalents, beginning of period   302,210   233,546  
Cash and cash equivalents, end of period   $ 531,763   $ 206,604  
Supplemental information:          
Cash payments for interest and income taxes:          
Interest paid   $ 10,789   $ 12,184  
Income taxes paid   8,274   4,751  
Non-cash investing and financing activities:          
Property, plant and equipment accrued   $ 17,571   $ 2,324  


(in thousands)


    Common Stock       Shares Held 
  $ 0.01 
Balance at January 1, 2011   26,386   $ 264   $ (2,467 ) $ (777 ) $ 488,648       $ 50,759   $ 244,400   $ 780,827  
Net income             $ 22,730     22,730   22,730  
Change in fair value of available for sale securities, net of taxes             754   754     754  
Foreign currency translation             15,727   15,727     15,727  
Total comprehensive income             $ 39,211        
Stock-based compensation   68         1,773           1,773  
Issuance of restricted shares, net of shares remitted   (19 )   (1,784 )             (1,784 )
Exercise of stock options   3         39           39  
Net tax benefit on exercise of stock options           1,105           1,105  
Employee stock purchase plan   12         699           699  
Balance at March 31, 2011   26,450   $ 264   $ (4,251 ) $ (777 ) $ 492,264       $ 67,240   $ 267,130   $ 821,870  

Sign up to receive our free Weekly News Bulletin