Loading, Please Wait...

CST: 25/08/2019 02:58:35   

Heritage-Crystal Clean, Inc. Announces Record Second Quarter 2019 Financial Results

31 Days ago

Second Quarter Highlights Include:

  • Revenue of $105.0 million, a second quarter record, was 4.7% higher than our second quarter of 2018.
     
  • Environmental Services segment revenue was also a second quarter record at $70.2 million, an increase of 8.9% compared to the second quarter of 2018.
     
  • Environmental Services segment profit before corporate selling, general, and administrative expenses was a 12-week quarter high of $19.0 million, compared to $16.5 million in the second quarter of 2018.
     
  • Net income of $7.1 million during the second quarter was a record high for a 12-week quarter.
     
  • Diluted earnings per share for the second quarter was $0.30 compared to $0.26 in the year-ago quarter.
     
  • EBITDA during the second quarter was $13.6 million.
     
  • Adjusted diluted income per share for the second quarter was $0.35, which represents a record high for a 12-week quarter.
     
  • Adjusted EBITDA was a record $15.9 million for the quarter compared to $13.9 million in the second quarter of 2018.

ELGIN, Ill., July 24, 2019 (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 15, 2019.

Second Quarter Review

Revenue for the second quarter of 2019 was $105.0 million compared to $100.3 million for the same quarter of 2018, an increase of 4.7%.

Operating margin increased to 21.8% compared to 21.1% in the second quarter of 2018 primarily as a result of improved operating results in our Environmental Services segment. Our second quarter SG&A expense was 11.2% of revenue which is approximately 100 basis points lower than the same period in 2018 mainly driven by higher revenue and lower severance costs, partially offset by higher bad debt expense.

Net income attributable to common shareholders for the second quarter was $7.1 million compared to net income attributable to common shareholders of $6.0 million in the year earlier quarter. Diluted earnings per share was  $0.30 compared to diluted earnings per share of $0.26 in the year-ago quarter. Excluding the impact of site closure costs incurred during the quarter, second quarter adjusted diluted earnings per share was $0.35.

Segments

Our Environmental Services segment includes parts cleaning, containerized waste, vacuum services, antifreeze recycling, and field services. Environmental Services revenue was $70.2 million during the quarter compared to $64.4 million during the second quarter of fiscal 2018. The 8.9% increase in revenue was driven by growth in most of our product and service lines with the antifreeze, vacuum, and containerized waste businesses being the largest contributors to growth. Excluding the impact of a large field services project from our second quarter 2018 results, our organic revenue growth in the segment during the second quarter 2019 was 11.3%. Environmental Services profit before corporate selling, general, and administrative expenses was $19.0 million, or 27.0% of revenue, compared to $16.5 million, or 25.6% of revenue, in the year-ago quarter. The $2.5 million increase was mainly driven by higher revenue along with lower disposal costs, partially offset by higher labor costs.

President and CEO Brian Recatto commented, "The second quarter represents the sixth-straight quarter of high single or double-digit revenue growth in our Environmental Services segment. This continued strong growth and improved cost management resulted in record operating profit for a 12-week quarter."

Our Oil Business segment includes used oil collection activities, re-refining activities, and sales of recycled fuel oil. During the second quarter of fiscal 2019, Oil Business revenues decreased (2.9)% to $34.8 million compared to $35.9 million in the second quarter of fiscal 2018. The decline in revenue was mainly due to a decrease in our selling price of base oil, partially offset by an increase in the volume of base oil gallons sold. Oil Business segment operating margin fell to 11.2% in the second quarter of 2019 compared to 13.0% in the second quarter of fiscal 2018. The lower operating margin compared to the second quarter of 2018 was mainly due to a decrease in the spread between our selling price for base oil and our feedstock costs.

Recatto commented, "We are encouraged by the vast improvement in oil business profitability compared to the first quarter and the overall double-digit operating margin percentage. This strong performance was mainly due to higher base oil selling prices compared to the first quarter, and record production at our re-refinery during the second quarter."

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 6, 2019 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 91 branches serving over 95,000 customer locations.

Conference Call

The Company will host a conference call on Thursday, July 25, 2019 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 15,
2019
  December 29,
2018
         
ASSETS        
Current assets:        
Cash and cash equivalents   $ 52,168     $ 43,579  
Accounts receivable - net   54,976     51,744  
Inventory - net   29,052     33,059  
Other current assets   7,422     6,835  
Total current assets   143,618     135,217  
Property, plant and equipment - net   145,599     139,987  
Right of use assets   70,160      
Equipment at customers - net   23,866     23,814  
Software and intangible assets - net   16,756     14,681  
Goodwill   32,742     34,123  
Total assets   $ 432,741     $ 347,822  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Accounts payable   $ 38,323     $ 32,630  
Current portion of lease liabilities   20,708      
Contract liabilities - net   2,371     166  
Accrued salaries, wages, and benefits   4,890     6,024  
Taxes payable   6,924     6,120  
Other current liabilities   5,670     5,089  
Total current liabilities   78,886     50,029  
Lease liabilities, net of current portion   49,894      
Long-term debt   29,186     29,046  
Deferred income taxes   15,666     14,516  
Total liabilities   $ 173,632     $ 93,591  
         
STOCKHOLDERS' EQUITY:        
Common stock - 26,000,000 shares authorized at $0.01 par value, 23,180,012 shares and 23,058,584 shares issued and outstanding at June 15, 2019 and December 29, 2018, respectively   $ 232     $ 231  
Additional paid-in capital   198,074     197,533  
Retained earnings   60,363     55,819  
Total Heritage-Crystal Clean, Inc. stockholders' equity   258,669     253,583  
Noncontrolling interest   440     648  
Total equity   259,109     254,231  
Total liabilities and stockholders' equity   $ 432,741     $ 347,822  
                 

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

      Second Quarter Ended,   First Half Ended,
      June 15,
2019
  June 16,
2018
  June 15,
2019
  June 16,
2018
                   
Revenues                
  Service revenues   $ 57,936     $ 60,014     $ 114,309     $ 114,151  
  Product revenues   41,302     40,289     77,160     69,299  
  Rental income   5,762         9,304      
Total revenues   $ 105,000     $ 100,303     $ 200,773     $ 183,450  
                   
Operating expenses                
  Operating costs   $ 78,849     $ 76,272     $ 161,332     $ 144,658  
  Selling, general, and administrative expenses   11,042     11,522     23,438     22,544  
  Depreciation and amortization   4,061     3,659     8,196     7,302  
  Other expense - net   1,514     341     1,457     729  
Operating income   9,534     8,509     6,350     8,217  
Interest expense – net   219     240     449     486  
Income before income taxes   9,315     8,269     5,901     7,731  
Provision for income taxes   2,151     2,149     1,165     1,713  
Net income   7,164     6,120     4,736     6,018  
Income attributable to noncontrolling interest   108     121     192     139  
Net income attributable to Heritage-Crystal Clean, Inc. common stockholders   $ 7,056     $ 5,999     $ 4,544     $ 5,879  
                 
Net income per share: basic   $ 0.30     $ 0.26     $ 0.20     $ 0.26  
Net income per share: diluted   $ 0.30     $ 0.26     $ 0.19     $ 0.25  
                 
Number of weighted average shares outstanding: basic   23,137     23,029     23,127     22,995  
Number of weighted average shares outstanding: diluted   23,368     23,361     23,366     23,246  
                         

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

Second Quarter Ended,
June 15, 2019
(thousands)   Environmental
Services
  Oil Business   Corporate and
Eliminations
  Consolidated
Revenues                
  Service revenues   $ 54,332     $ 3,604     $     $ 57,936  
  Product revenues   10,178     31,124         41,302  
  Rental income   5,686     76         5,762  
Total revenues   $ 70,196     $ 34,804     $     $ 105,000  
Operating expenses                    
  Operating costs   49,374     29,475         78,849  
  Operating depreciation and amortization   1,872     1,436         3,308  
Profit before corporate selling, general, and administrative expenses   $ 18,950     $ 3,893     $     $ 22,843  
Selling, general, and administrative expenses                   11,042     11,042  
Depreciation and amortization from SG&A                   753     753  
Total selling, general, and administrative expenses                   $ 11,795     $ 11,795  
Other expense - net                   1,514     1,514  
Operating income                           9,534  
Interest expense – net                   219     219  
Income before income taxes               $ 9,315  
                     


Second Quarter Ended,
June 16, 2018
(thousands)  

Environmental
Services
  Oil Business   Corporate and
Eliminations
  Consolidated
Revenues                
  Service revenues   $ 56,924     $ 3,090     $     $ 60,014  
  Product revenues   7,521     32,768         40,289  
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  
                     


                   
First Half Ended,
June 15, 2019
  (thousands)  

Environmental
Services
  Oil Business   Corporate and
Eliminations
  Consolidated
                   
Revenues                
  Service revenues   $ 107,207     $ 7,102     $     $ 114,309  
  Product revenues   20,315     56,845         77,160  
  Rental income   9,171     133         9,304  
Total revenues   $ 136,693     $ 64,080     $     $ 200,773  
Operating expenses                
  Operating costs   99,538     61,794         161,332  
  Operating depreciation and amortization   3,508     2,868         6,376  
Profit (loss) before corporate selling, general, and administrative expenses   $ 33,647     $ (582 )   $     $ 33,065  
Selling, general, and administrative expenses           23,438     23,438  
Depreciation and amortization from SG&A           1,820     1,820  
Total selling, general, and administrative expenses           $ 25,258     $ 25,258  
Other expense - net           1,457     1,457  
Operating income                   6,350  
Interest expense – net           449     449  
Income before income taxes               $ 5,901  
                     


                   
First Half Ended,
June 16, 2018
  (thousands)  

Environmental
Services
  Oil Business   Corporate and
Eliminations
  Consolidated
                   
Revenues                
  Service revenues   $ 107,956     $ 6,195     $     $ 114,151  
  Product revenues   13,964     55,335         69,299  
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  
                     


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 15,
2019
  June 16,
2018
  June 15,
2019
  June 16,
2018
 
Net income     $ 7,164     $ 6,120     $ 4,736     $ 6,018    
                       
Interest expense – net   219     240     449     486    
                       
Provision for income taxes   2,151     2,149     1,165     1,713    
                       
Depreciation and amortization   4,061     3,659     8,196     7,302    
                       
EBITDA (a)     $ 13,595     $ 12,168     $ 14,546     $ 15,519    
                       
Adoption of ASC 842 lease accounting standard(b)

          2,202        
                       
Non-cash compensation (c)   833     1,042     1,721     1,869    
                     
Retirement costs and severance (d)       532     656     659    
                   
Site closure costs (e)   1,510     184     1,510     509    
                   
Implementation costs of ASC 842(f)           355        
                   
Adjusted EBITDA (g)   $ 15,938     $ 13,926     $ 20,990     $ 18,556    
                       
(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) Revenue deferred during the first quarter from the adoption of ASC 842 lease accounting standard.  
     
(c) Non-cash compensation expenses which are recorded in SG&A.  
     
(d) Cost associated with retirement of our former SVP Sales and other employee separations.  
     
(e) Costs mainly associated with the closure of the Company’s facility located in Wilmington, Delaware.  
     
(f) One-time cost associated with the implementation of ASC 842.  
     
(g) 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 income and adjusted net income 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 income and adjusted net income per share provides investors and management useful information about the income impact from the site closure costs adjustment for the second quarter of 2019 compared to the second fiscal quarter of 2018.  
                     
Reconciliation of our Net Income and Net Income Per Share Determined in Accordance with U.S. GAAP to our Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Diluted Income Per Share  
(In thousands, except per share amounts)  
   
      Second Quarter Ended,  
             
      June 15, 2019   June 16, 2018  
             
GAAP net income     $ 7,164     $ 6,120    
             
Site Closure costs 1,510     184    
             
Net tax effect of items above   (355 )   (48 )  
             
Adjusted net income     $ 8,319     $ 6,256    
             
GAAP diluted income per share   $ 0.30     $ 0.26    
             
Site closure costs per share 0.07     0.01    
             
Net tax effect per share of items above (0.02 )      
             
Adjusted diluted net income per share   $ 0.35     $ 0.27    
             

 

Is your business listed correctly on America’s largest city directory network of 1,000 portals?