• Heritage-Crystal Clean, Inc. Announces 2018 Second Quarter Financial Results

    Source: Nasdaq GlobeNewswire / 25 Jul 2018 17:00:21   America/New_York

    Highlights:

    • Revenue for the second quarter was $100.3 million which represents a record high for a 12-week quarter and an increase of 16.1%, or $13.9 million, compared to the same quarter of 2017.
       
    • Environmental Services segment second quarter revenue of $64.4 million represents growth of 17.0% compared to the second quarter of 2017 and is a record high for a 12-week quarter.
       
    • Oil Business segment operating margin was a record high of $4.7 million, or 13.0%, on revenue of $35.9 million in the second quarter.
       
    • EBITDA for the second quarter was $12.2 million.
       
    • Adjusted EBITDA of $13.7 million represents a record for a 12-week quarter.
       
    • Diluted earnings per share for the second quarter was $0.26, and adjusted diluted earnings per share of $0.27 is a record for a 12-week quarter.

    ELGIN, Ill., July 25, 2018 (GLOBE NEWSWIRE) -- Heritage-Crystal Clean, Inc. (Nasdaq:HCCI), a leading provider of parts cleaning, used oil re-refining, and hazardous and non-hazardous waste services primarily focused on small and mid-sized customers, today announced results for the second quarter which ended June 16, 2018.

    Second Quarter Review

    Revenues for the second quarter of 2018 were $100.3 million compared to $86.4 million for the same quarter of 2017, an increase of 16.1%.

    Operating margin decreased to 21.1% compared to 22.9% in the second quarter of 2017 mainly driven by higher costs in our Environmental Services segment. Our second quarter SG&A expense as a percentage of revenue decreased to 12.3% compared to 13.2% for the second quarter of 2017 mainly driven by higher revenue, partially offset by higher severance and share-based compensation expense.

    Net income attributable to common shareholders for the second quarter was $6.0 million compared to net income attributable to common shareholders of $6.9 million in the year earlier quarter. Basic earnings per share was $0.26 in the second quarter of fiscal 2018 compared to basic earnings per share of $0.31 in the second quarter of fiscal 2017. Earnings during the second quarter of 2017 were favorably impacted by a settlement with the sellers of FCC Environmental of $3.6 million on a pre-tax basis and $0.11 per diluted share on an after tax basis.

    Segments

    Our Environmental Services segment includes parts cleaning, containerized waste, vacuum services, antifreeze recycling, and field services. Environmental Services revenue was $64.4 million during the quarter compared to $55.1 million during the second quarter of fiscal 2017. The increase in revenue was driven by growth in all of our service lines with the strongest growth in field services. Environmental Services operating margin was 25.6% compared to 30.3% in 2017, but increased from 23.1% in the first quarter of 2018. As outlined in our first quarter 2018 earnings conference call, the decline in operating margin was primarily due to higher disposal and labor costs during the quarter.

    President and CEO Brian Recatto commented, "We are very excited about the record revenue our branch sales and service team produced during the second quarter. As anticipated, we improved our operating margin in the Environmental Services segment compared to the first quarter of 2018. We continue to work toward our goal of bringing operating margins back to the level experienced during the second half of 2017."

    Our Oil Business segment includes used oil collection activities, sales of recycled fuel oil, and re-refining activities. During the second quarter of fiscal 2018, Oil Business revenues increased 14.6% to $35.9 million compared to $31.3 million in the second quarter of fiscal 2017. The increase in revenue was due to stronger base oil pricing and higher volumes of base oil gallons sold. Oil Business segment operating margin was 13.0% in the second quarter of 2018 compared to 9.9% in the second quarter of fiscal 2017. Higher operating margin was due to improved catalyst utilization, and better leveraging of labor and maintenance costs as a result of record base oil production at our re-refinery.

    Recatto commented, "During the second quarter, record breaking production at our re-refinery allowed us to generate the highest Oil Business segment operating margin since we began producing base oil at the re-refinery."

    Safe Harbor Statement

    All references to the “Company,” “we,” “our,” and “us” refer to Heritage-Crystal Clean, Inc., and its subsidiaries.

    This release contains forward-looking statements that are based upon current management expectations. Generally, the words "aim," "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "project," "should," "will be," "will continue," "will likely result," "would" and similar expressions identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. These risks, uncertainties and other important factors include, among others: general economic conditions and downturns in the business cycles of automotive repair shops, industrial manufacturing businesses and small businesses in general; increased solvent, fuel and energy costs and volatility in the price of crude oil, the selling price of lubricating base oil, solvent, fuel, energy, and commodity costs; our ability to successfully integrate businesses that we acquire; our ability to enforce our rights under the FCC Environmental purchase agreement; our ability to pay our debt when due and comply with our debt covenants; our ability to successfully operate our used oil re-refinery and to cost effectively collect or purchase used oil or generate operating results; increased market supply or decreased demand for base oil; further consolidation and/or declines in the United States automotive repair and manufacturing industries; the impact of extensive environmental, health and safety and employment laws and regulations on our business; legislative or regulatory requirements or changes adversely affecting our business; competition in the industrial and hazardous waste services industries and from other used oil processing facilities including other re-refineries; claims and involuntary shutdowns relating to our handling of hazardous substances; the value of our used solvents and oil inventory, which may fluctuate significantly; our ability to expand our non-hazardous programs for parts cleaning; our dependency on key employees; our level of indebtedness, which could affect our ability to fulfill our obligations, impede the implementation of our strategy, and expose us to interest rate risk; our ability to effectively manage our extended network of branch locations; the control of The Heritage Group over the Company; and the risks identified in our Annual Report on Form 10-K filed with the SEC on March 1, 2018 and subsequent filings with the SEC. Given these uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. We assume no obligation to update or revise them or provide reasons why actual results may differ. The information in this release should be read in light of such risks and in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this release.

    About Heritage-Crystal Clean, Inc.

    Heritage-Crystal Clean, Inc. provides parts cleaning, used oil re-refining, and hazardous and non-hazardous waste services primarily to small and mid-sized customers in the vehicle maintenance sector as well as manufacturers and other industrial businesses. Our service programs include parts cleaning, containerized waste management, used oil collection and re-refining, vacuum truck services, waste antifreeze collection, recycling and product sales, and field services. These services help our customers manage their used chemicals and liquid and solid wastes, while also helping to minimize their regulatory burdens.  Our customers include businesses involved in vehicle maintenance operations, such as car dealerships, automotive repair shops, and trucking firms, as well as small-to-medium sized manufacturers, such as metal product fabricators and printers, and other industrial businesses. Through our used oil re-refining program, we recycle used oil into high quality lubricating base oil, and we are a supplier to firms that produce and market finished lubricants. Through our antifreeze program we recycle spent antifreeze and produce a full line of virgin-quality antifreeze products. Heritage-Crystal Clean, Inc. is headquartered in Elgin, Illinois, and operates through 89 branches serving over 90,000 customer locations.

    Conference Call

    The Company will host a conference call on Thursday, July 26, 2018 at 9:30 AM Central Time, during which management will give a brief presentation focusing on the Company's operations and financial results. Interested parties can listen to the audio webcast available through our company website, http://crystal-clean.com/investor-relations/, and can participate in the call by dialing (720) 545-0014.

    The Company uses its website to make information available to investors and the public at www.crystal-clean.com.

    CONTACT

    Mark DeVita, Chief Financial Officer, at (847) 836-5670

    Heritage-Crystal Clean, Inc.
    Condensed Consolidated Balance Sheets
    (In Thousands, Except Share and Par Value Amounts)
    (Unaudited)

      June 16,
     2018
     December 30,
     2017
    ASSETS    
    Current Assets:    
    Cash and cash equivalents $41,831  $41,889 
    Accounts receivable - net 53,907  45,491 
    Inventory - net 26,931  21,639 
    Other current assets 5,040  5,895 
    Total Current Assets 127,709  114,914 
    Property, plant and equipment - net 131,555  128,119 
    Equipment at customers - net 23,851  23,312 
    Software and intangible assets - net 15,905  16,732 
    Goodwill 34,125  31,580 
    Total Assets $333,145  $314,657 
         
    LIABILITIES AND STOCKHOLDERS' EQUITY    
    Current Liabilities:    
    Accounts payable $35,166  $25,568 
    Contract liabilities - net 208   
    Accrued salaries, wages, and benefits 4,181  6,386 
    Taxes payable 6,475  5,787 
    Other current liabilities 4,521  2,690 
    Total Current Liabilities 50,551  40,431 
    Long-term debt 28,884  28,744 
    Deferred income taxes 11,260  9,556 
    Total Liabilities $90,695  $78,731 
         
    STOCKHOLDERS' EQUITY:    
    Common stock - 26,000,000 shares authorized at $0.01 par value, 23,042,972 and 22,891,674 shares issued and outstanding at June 16, 2018 and December 30, 2017, respectively $230  $229 
    Additional paid-in capital 194,774  193,640 
    Retained earnings 46,970  41,359 
    Total Heritage-Crystal Clean, Inc. Stockholders' Equity 241,974  235,228 
    Noncontrolling interest 476  698 
    Total Equity $242,450  $235,926 
    Total Liabilities and Stockholders' Equity $333,145  $314,657 
     

    Heritage-Crystal Clean, Inc.
    Condensed Consolidated Statements of Income
    (In Thousands, Except per Share Amounts)
    (Unaudited)

       Second Quarter Ended, First Half Ended,
       June 16,
     2018
     June 17,
     2017
     June 16,
     2018
     June 17,
     2017
              
    Revenues        
     Product revenues $40,289  $31,832  $69,299  $58,812 
     Service revenues 60,014  54,550  114,151  108,023 
    Total revenues $100,303  $86,382  $183,450  $166,835 
              
    Operating expenses        
     Operating costs $76,272  $63,270  $144,658  $124,560 
     Selling, general, and administrative expenses 11,522  10,575  22,544  22,916 
     Depreciation and amortization 3,659  4,184  7,302  8,316 
     Other expense (income) - net 341  (3,027) 729  (8,033)
    Operating income 8,509  11,380  8,217  19,076 
    Interest expense – net 240  412  486  499 
    Income before income taxes 8,269  10,968  7,731  18,577 
    Provision for income taxes 2,149  3,982  1,713  6,774 
    Net income 6,120  6,986  6,018  11,803 
    Income attributable to noncontrolling interest 121  52  139  105 
    Net income attributable to Heritage-Crystal Clean, Inc. common stockholders $5,999  $6,934  $5,879  $11,698 
             
    Net income per share: basic $0.26  $0.31  $0.26  $0.52 
    Net income per share: diluted $0.26  $0.30  $0.25  $0.51 
             
    Number of weighted average shares outstanding: basic 23,029  22,506  22,995  22,430 
    Number of weighted average shares outstanding: diluted 23,361  22,832  23,246  22,729 
     

    Heritage-Crystal Clean, Inc.
    Reconciliation of Operating Segment Information
    (Unaudited)

    Second Quarter Ended,
    June 16, 2018
     
    (thousands)  Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
    Revenues        
     Product revenues $7,521  $32,768  $  $40,289 
     Service revenues 56,924
      3,090
         60,014
     
    Total revenues $64,445  $35,858  $  $100,303 
    Operating expenses                
     Operating costs 46,456
       29,816      76,272 
     Operating depreciation and amortization 1,502
       1,389     2,891
     
    Profit before corporate selling, general, and administrative expenses $16,487  $4,653  $  $21,140 
    Selling, general, and administrative expenses          11,522   11,522 
    Depreciation and amortization from SG&A         768
      768
     
    Total selling, general, and administrative expenses         $12,290  $12,290 
    Other expense - net         341
       341 
    Operating income              8,509 
    Interest expense – net         240
      240
     
    Income before income taxes             $8,269 


    Second Quarter Ended,
    June 17, 2017
     
    (thousands)  Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
    Revenues        
     Product revenues $5,868  $25,964  $  $31,832 
     Service revenues 49,225
      5,325
        54,550 
    Total revenues $55,093  $31,289  $  $86,382 
    Operating expenses            
     Operating costs  36,601   26,669    63,270 
     Operating depreciation and amortization 1,801
      1,535
        3,336 
    Profit before corporate selling, general, and administrative expenses $16,691  $3,085  $  $19,776 
    Selling, general, and administrative expenses     10,575  10,575 
    Depreciation and amortization from SG&A     848  848 
    Total selling, general, and administrative expenses     $11,423  $11,423 
    Other (income) - net     (3,027) (3,027)
    Operating income       11,380 
    Interest expense – net     412  412 
    Income before income taxes       $10,968 


    First Half Ended,
    June 16, 2018
     
    (thousands) Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
              
    Revenues        
     Product revenues $13,964  $55,335  $  $69,299 
     Service revenues 107,956
      6,195
         114,151
     
    Total revenues $121,920  $61,530  $  $183,450 
    Operating expenses                
     Operating costs  89,181   55,477      144,658 
     Operating depreciation and amortization 2,992
      2,777
      
      5,769
     
    Profit before corporate selling, general, and administrative expenses $29,747  $3,276  $  $33,023 
    Selling, general, and administrative expenses          22,544   22,544 
    Depreciation and amortization from SG&A         1,533
       1,533 
    Total selling, general, and administrative expenses         $24,077  $24,077 
    Other expense - net         729
      729
     
    Operating income              8,217 
    Interest expense – net         486
      486
     
    Income before income taxes             $7,731 


    First Half Ended,
    June 17, 2017
    (thousands)  

    Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
              
    Revenues        
     Product revenues $11,592  $47,220  $  $58,812 
     Service revenues 96,716  11,307    108,023 
    Total revenues $108,308  $58,527  $  $166,835 
    Operating expenses            
     Operating costs 73,121  51,439    124,560 
     Operating depreciation and amortization 3,547  3,070    6,617 
    Profit before corporate selling, general, and administrative expenses $31,640  $4,018  $  $35,658 
    Selling, general, and administrative expenses     22,916  22,916 
    Depreciation and amortization from SG&A     1,699  1,699 
    Total selling, general, and administrative expenses     $24,615  $24,615 
    Other (income) - net     (8,033) (8,033)
    Operating income       19,076 
    Interest expense – net     499  499 
    Income before income taxes       $18,577 


     
    Heritage-Crystal Clean, Inc.
    Reconciliation of our Net Income Determined in Accordance with U.S. GAAP to Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) and to Adjusted EBITDA
    (Unaudited)
               
        Second Quarter Ended, First Half Ended,
               
    (thousands) June 16, 2018 June 17, 2017 June 16, 2018 June 17, 2017
    Net income  $6,120  $6,986  $6,018  $11,803 
               
    Interest expense - net 240  412  486  499 
               
    Provision for income taxes 2,149  3,982  1,713  6,774 
               
    Depreciation and amortization 3,659  4,184  7,302  8,316 
               
    EBITDA (a)  $12,168  $15,564  $15,519  $27,392 
               
    Non-cash compensation (b) 1,042  679  1,869  1,346 
               
    Gain from Arbitration award (c)       (5,136)
              
    Gain from settlement with sellers of FCCE (d)   (3,600)   (3,600)
             
    Severance (e) 532  186  659  181 
             
    Adjusted EBITDA (f) $13,742  $12,829  $18,047  $20,183 
               
    (a)EBITDA represents net income before provision for income taxes, interest income, interest expense, depreciation and amortization. We have presented EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by analysts, investors, our lenders, and other interested parties in the evaluation of companies in our industry. Management uses EBITDA as a measurement tool for evaluating our actual operating performance compared to budget and prior periods. Other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measure of performance under U.S. GAAP and should not be considered as a substitute for net income prepared in accordance with U.S. GAAP. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
     
     
      
     EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
      
     EBITDA does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our debt;
      
     EBITDA does not reflect tax expense or the cash requirements necessary to pay for tax obligations; and
      
     Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements.
      
     We compensate for these limitations by relying primarily on our U.S. GAAP results and using EBITDA only as a supplement.
      
    (b)Non-cash compensation expenses which are recorded in SG&A.
      
    (c)Gain from partial award for claims made in our arbitration related to our acquisition of FCC Environmental and International Petroleum Corp. in 2014.
      
    (d)Settlement of disputes related to the acquisition of FCC Environmental and International Petroleum Corp. of Delaware.
      
    (e)Severance charges related to employee separations.
      
    (f)We have presented Adjusted EBITDA because we consider it an important supplemental measure of our performance and believe it may be used by analysts, investors, our lenders, and other interested parties in the evaluation of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do. Adjusted EBITDA is not a measure of performance under U.S. GAAP and should not be considered as a substitute for net income prepared in accordance with U.S. GAAP. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.
      


    Use of Non-GAAP Financial Measures 
        
    Adjusted net earnings (loss) and adjusted net earnings (loss) per share are non-GAAP financial measures. Non-GAAP financial measures should be considered in addition to, but not as substitute for, financial measures prepared in accordance with GAAP. Management believes that adjusted net earnings and adjusted net earnings per share provide investors and management useful information about the earnings impact of the settlement received in the second fiscal quarter of 2018 and 2017. 
     
           
    Reconciliation of our Net Earnings and Net Earnings Per Share Determined in Accordance with U.S. GAAP to our Non-GAAP Adjusted Net Earnings and Non-GAAP Adjusted Net Earnings Per Share 
    (In thousands, except per share amounts) 
      
       Second Quarter Ended, 
           
       June 16, 2018 June 17, 2017 
           
    GAAP net earnings  $6,120  $6,986  
           
    Severance (a)  532  186  
           
    Net tax effect on severance (138) (68) 
           
    Gain from settlement with sellers of FCCE (b)  (3,600) 
           
    Net tax effect of Gain from settlement with sellers of FCCE  1,172  
           
    Adjusted net earnings  $6,514  $4,676  
           
    GAAP diluted earnings per share $0.26  $0.30  
           
    Severance per share 0.02  0.01  
           
    Net tax effect per share of severance (0.01)   
         
    Gain from settlement with sellers of FCCE  (0.16) 
          
    Net tax effect per share on Gain from settlement with sellers of FCCE  0.05  
           
    Adjusted diluted earnings per share $0.27  $0.20  
           
    (a) Severance charges related to employee separations. 
           
    (b) Settlement from the acquisition of FCC Environmental and International Petroleum Corp. of Delaware. 

     

    Primary Logo

Share on,