• Heritage-Crystal Clean, Inc. Announces Third Quarter 2019 Financial Results

    Source: Nasdaq GlobeNewswire / 16 Oct 2019 21:30:01   Europe/London

    Third Quarter Highlights Include:

    • Revenue of $104.8 million, a third quarter record, was 5.2% higher than the third quarter of 2018.
       
    • Environmental Services segment reported record third quarter revenue of $69.0 million, an increase of 9.0% compared to the third quarter of 2018.
       
    • Environmental Services segment profit before corporate selling, general, and administrative expenses increased 9.3% compared to the third quarter of 2018.
       
    • Adjusted EBITDA was $14.6 million for the quarter compared to $14.1 million in the third quarter of 2018.

    ELGIN, Ill., Oct. 16, 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 third quarter which ended September 7, 2019.

    Third Quarter Review

    Revenue for the third quarter of 2019 was $104.8 million compared to $99.7 million for the same quarter of 2018, an increase of 5.2%.

    Operating margin decreased slightly to 20.5% compared to 20.7% in the third quarter of 2018. Our third quarter SG&A expense was $12.0 million, or 11.5% of revenues, compared to $11.4 million, or 11.4% of revenues, for the third quarter of 2018.

    Net income attributable to common shareholders for the third quarter was $6.0 million compared to net income attributable to common shareholders of $6.3 million in the year earlier quarter. Diluted earnings per share was  $0.25 compared to diluted earnings per share of $0.27 in the year-ago quarter. Excluding the write-off of assets and other costs associated with idled sites incurred during the quarter, third quarter adjusted diluted earnings per share was $0.28 (see reconciliation below).

    Segments

    Our Environmental Services segment includes parts cleaning, containerized waste, vacuum services, antifreeze recycling, and field services. Environmental Services revenue was $69.0 million during the quarter compared to $63.3 million during the third quarter of fiscal 2018. The 9.0% increase in revenue was driven by growth in most of our product and service lines with the vacuum, containerized waste, parts cleaning and antifreeze businesses being the primary contributors to the growth. Excluding the impact of a large field services project from our third quarter 2018 results, our organic revenue growth in the segment during the third quarter 2019 was 10.5%. Environmental Services profit before corporate selling, general, and administrative expenses was $17.8 million compared to $16.2 million in the year-ago quarter. The approximate $1.5 million increase was mainly driven by higher revenue.

    President and CEO Brian Recatto commented, "I am pleased to report that the third quarter represented our seventh consecutive quarter of high single or double-digit revenue growth in our Environmental Services segment.  Unfortunately, unusually high healthcare cost resulted in lower than expected segment operating margin during the quarter."

    Our Oil Business segment includes used oil collection activities, re-refining activities, and sales of recycled fuel oil. During the third quarter of fiscal 2019, Oil Business revenues decreased 1.4% to $35.8 million compared to $36.4 million in the third 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 10.5% in the third quarter of 2019 compared to 12.0% in the third quarter of fiscal 2018. The lower operating margin compared to the third 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 pleased with the results in the Oil Business segment given that base oil conditions during the third quarter were worse relative to last year."

    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 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 90 branches serving approximately 95,000 customer locations.

    Conference Call

    The Company will host a conference call on Thursday, October 17, 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)

      September 7,
    2019
     December 29,
    2018
         
    ASSETS    
    Current assets:    
    Cash and cash equivalents $58,951  $43,579 
    Accounts receivable - net 55,653  51,744 
    Inventory - net 28,259  33,059 
    Other current assets 7,186  6,835 
    Total current assets 150,049  135,217 
    Property, plant and equipment - net 145,954  139,987 
    Right of use assets 79,498   
    Equipment at customers - net 24,159  23,814 
    Software and intangible assets - net 16,149  14,681 
    Goodwill 32,744  34,123 
    Total assets $448,553  $347,822 
         
    LIABILITIES AND STOCKHOLDERS' EQUITY    
    Current liabilities:    
    Accounts payable $35,089  $32,630 
    Current portion of lease liabilities 20,257   
    Contract liabilities - net 2,332  166 
    Accrued salaries, wages, and benefits 6,051  6,024 
    Taxes payable 7,112  6,120 
    Other current liabilities 4,989  5,089 
    Total current liabilities 75,830  50,029 
      Lease liabilities, net of current portion 59,291   
      Long-term debt 29,255  29,046 
      Deferred income taxes 17,870  14,516 
    Total liabilities $182,246  $93,591 
         
    STOCKHOLDERS' EQUITY:    
    Common stock - 26,000,000 shares authorized at $0.01 par value, 23,185,567 shares and 23,058,584 shares issued and outstanding at September 7, 2019 and December 29, 2018, respectively $232  $231 
    Additional paid-in capital 199,216  197,533 
    Retained earnings 66,333  55,819 
    Total Heritage-Crystal Clean, Inc. stockholders' equity 265,781  253,583 
    Noncontrolling interest 526  648 
    Total equity 266,307  254,231 
    Total liabilities and stockholders' equity $448,553  $347,822 

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

       Third Quarter Ended, First Three Quarters Ended,
       September 7,
    2019
     September 8,
    2018
     September 7,
    2019
     September 8,
    2018
              
    Revenues        
     Service revenues $57,208  $58,054  $171,522  $172,205 
     Product revenues 41,964  41,620  119,124  110,918 
     Rental income 5,668    14,967   
    Total revenues $104,840  $99,674  $305,613  $283,123 
              
    Operating expenses        
     Operating costs $80,116  $76,045  $241,449  $220,702 
     Selling, general, and administrative expenses 11,241  10,641  34,679  33,185 
     Depreciation and amortization 3,980  3,776  12,176  11,078 
     Other expense - net 1,020  253  2,477  983 
    Operating income 8,483  8,959  14,832  17,175 
    Interest expense – net 181  256  629  742 
    Income before income taxes 8,302  8,703  14,203  16,433 
    Provision for income taxes 2,246  2,284  3,411  3,996 
    Net income 6,056  6,419  10,792  12,437 
    Income attributable to noncontrolling interest 86  74  278  213 
    Net income attributable to Heritage-Crystal Clean, Inc. common stockholders $5,970  $6,345  $10,514  $12,224 
             
    Net income per share: basic $0.26  $0.28  $0.45  $0.53 
    Net income per share: diluted $0.25  $0.27  $0.45  $0.52 
             
    Number of weighted average shares outstanding: basic 23,185  23,048  23,146  23,013 
    Number of weighted average shares outstanding: diluted 23,421  23,404  23,384  23,299 

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

    Third Quarter Ended,
    September 7, 2019
    (thousands)  

    Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
    Revenues        
     Service revenues $54,066  $3,142  $  $57,208 
     Product revenues  9,305   32,659     41,964 
     Rental income 5,620  48    5,668 
    Total revenues $68,991  $35,849  $  $104,840 
    Operating expenses        
     Operating costs  49,486   30,630     80,116 
     Operating depreciation and amortization  1,743   1,441     3,184 
    Profit before corporate selling, general, and administrative expenses $17,762  $3,778  $  $21,540 
    Selling, general, and administrative expenses      11,241   11,241 
    Depreciation and amortization from SG&A      796   796 
    Total selling, general, and administrative expenses     $12,037  $12,037 
    Other expense - net     1,020   1,020 
    Operating income        8,483 
    Interest expense – net      181   181 
    Income before income taxes       $8,302 


    Third Quarter Ended,
    September 8, 2018
    (thousands)  

    Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
    Revenues        
     Service revenues $55,473  $2,581  $  $58,054 
     Product revenues 7,834  33,786    41,620 
    Total revenues $63,307  $36,367  $  $99,674 
    Operating expenses        
     Operating costs  45,460   30,585     76,045 
     Operating depreciation and amortization  1,599   1,410     3,009 
    Profit before corporate selling, general, and administrative expenses $16,248  $4,372  $  $20,620 
    Selling, general, and administrative expenses      10,641   10,641 
    Depreciation and amortization from SG&A      767   767 
    Total selling, general, and administrative expenses     $11,408  $11,408 
    Other expense - net      253   253 
    Operating income        8,959 
    Interest expense – net      256   256 
    Income before income taxes       $8,703 


              
    First Three Quarters Ended,
    September 7, 2019
     (thousands)  

    Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
              
    Revenues        
     Service revenues $161,273  $10,249  $  $171,522 
     Product revenues  29,620   89,504     119,124 
     Rental income 14,791  176    14,967 
    Total revenues $205,684  $99,929  $  $305,613 
    Operating expenses        
     Operating costs  149,024   92,425     241,449 
     Operating depreciation and amortization  5,252   4,308     9,560 
    Profit before corporate selling, general, and administrative expenses $51,408  $3,196  $  $54,604 
    Selling, general, and administrative expenses      34,679   34,679 
    Depreciation and amortization from SG&A      2,616   2,616 
    Total selling, general, and administrative expenses     $37,295  $37,295 
    Other expense - net      2,477   2,477 
    Operating income          14,832 
    Interest expense – net      629   629 
    Income before income taxes       $14,203 


              
    First Three Quarters Ended,
    September 8, 2018
     (thousands)  

    Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
              
    Revenues        
     Service revenues $163,428  $8,777  $  $172,205 
     Product revenues 21,798  89,120    110,918 
    Total revenues $185,226  $97,897  $  $283,123 
    Operating expenses        
     Operating costs  134,640   86,062     220,702 
     Operating depreciation and amortization  4,590   4,188     8,778 
    Profit before corporate selling, general, and administrative expenses $45,996  $7,647  $  $53,643 
    Selling, general, and administrative expenses      33,185   33,185 
    Depreciation and amortization from SG&A      2,300   2,300 
    Total selling, general, and administrative expenses     $35,485  $35,485 
    Other expense - net      983   983 
    Operating income        17,175 
    Interest expense – net      742   742 
    Income before income taxes       $16,433 


    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) 
                
        Third Quarter Ended, First Three Quarters Ended, 
                
    (thousands)  September 7, 2019 September 8, 2018 September 7, 2019 September 8, 2018 
    Net income  $6,056  $6,419  $10,792  $12,437  
                
    Interest expense – net 181  256  629  742  
                
    Provision for income taxes 2,246  2,284  3,411  3,996  
                
    Depreciation and amortization 3,980  3,776  12,176  11,078  
                
    EBITDA (a)  $12,463  $12,735  $27,008  $28,253  
                
    Adoption of ASC 842 lease accounting standard(b)     2,202    
                
    Non-cash compensation (c) 1,022  1,190  2,744  3,060  
               
    Retirement costs and severance (d) 80    746  639  
              
    Costs and asset write-offs associated with site closures (e) 1,020  186  2,530  695  
              
    Implementation costs of ASC 842(f)     355    
              
    Adjusted EBITDA (g) $14,585  $14,111  $35,585  $32,647  
                
    (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)Costs associated with the retirement of our former SVP Sales and other employee separations. 
       
    (e)Costs and asset write-offs 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 
        
    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 
        
    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 asset write-offs and other costs associated with site closures for the third quarter of 2019 compared to the third quarter of 2018. 
     
      
       Third Quarter Ended, 
           
    (in thousands, except per share amounts) September 7, 2019 September 8, 2018 
           
    GAAP net income  $6,056  $6,419  
           
    Costs and asset write-offs associated with site closures1,020  185  
           
    Net tax effect of items above (263) (47) 
           
    Adjusted net income  $6,813  $6,557  
           
    GAAP diluted income per share $0.25  $0.27  
           
    Costs and asset write-offs associated with site closures
    per share
    0.04  0.01  
           
    Net tax effect per share of items above(0.01)   
           
    Adjusted diluted net income per share $0.28  $0.28  
           

     

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