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

    Source: Nasdaq GlobeNewswire / 17 Oct 2018 22:00:02   Europe/London

    The Following Results were Third Quarter Records:

    • Revenue for the third quarter was $99.7 million, an increase of 19.6% compared to the same quarter of 2017.
       
    • Environmental Services segment revenue was $63.3 million for the third quarter, an increase of 15.0% compared to the third quarter of 2017.
       
    • Oil Business segment revenue was $36.4 million, growth of 28.6% compared to a year ago.
       
    • Net income attributable to common shareholders was $6.3 million.
       
    • Diluted earnings per share of $0.27 for the third quarter increased 35% from the prior year.

    Other Highlights

    • Profit before corporate selling, general, and administrative expenses was $20.6 million, an increase of 26.2%, compared to the third quarter of 2017.
       
    • Cash flow from operations for the quarter was $10.2 million, an increase of 147% compared to the third quarter of 2017.
       
    • EBITDA of $12.7 million and Adjusted EBITDA of $13.9 million were each a record for a fiscal third quarter.

    ELGIN, Ill., Oct. 17, 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 third quarter which ended September 8, 2018.

    Third Quarter Review

    Revenues for the third quarter of 2018 were $99.7 million compared to $83.3 million for the same quarter of 2017, an increase of 19.6%.

    Operating margin increased to 20.7% compared to 19.6% in the third quarter of 2017 mainly driven by higher revenue in both of our segments, partially offset by higher disposal, labor, and transportation costs. Our third quarter SG&A expense as a percentage of revenue decreased to 11.4% compared to 14.2% for the third quarter of 2017 mainly driven by higher revenue and lower severance costs, partially offset by higher share-based compensation expense.

    Net income attributable to common shareholders for the third quarter was $6.3 million which is a record high for a third quarter. This compares to net income attributable to common shareholders of $4.7 million in the year earlier quarter. Diluted earnings per share was $0.27 in the third quarter of fiscal 2018 compared to diluted earnings per share of $0.20 in the third quarter of fiscal 2017.

    Segments

    Our Environmental Services segment includes parts cleaning, containerized waste, vacuum services, antifreeze recycling, and field services. Environmental Services revenue was $63.3 million during the quarter compared to $55.0 million during the third quarter of fiscal 2017. The increase in revenue was driven by growth in all of our product and service lines with the strongest growth in our field services, containerized waste, and antifreeze businesses. Environmental Services profit before corporate selling, general, and administrative expenses was $16.2 million which represents a record high for a third quarter. This compares to $14.9 million in the year ago quarter. The $1.3 million increase was mainly driven by higher revenue, partially offset by higher disposal and transportation costs.

    President and CEO Brian Recatto commented, "While we achieved approximately 9% growth in profit before SG&A expense in this segment on a year-over-year basis, we believe our improvement could have been greater if not for the inflationary pressure we experienced during the third quarter."

    Our Oil Business segment includes used oil collection activities, sales of recycled fuel oil, and re-refining activities. During the third quarter of fiscal 2018, Oil Business revenues increased 28.6% to $36.4 million compared to $28.3 million in the third 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 12.0% in the third quarter of 2018 compared to 4.9% in the third quarter of fiscal 2017. Higher operating margin was due to improved route efficiency in our used oil collection business, and lower operating costs at our re-refinery.

    Recatto commented, "We are very proud that for the first time we generated double-digit operating margin in consecutive quarters in this segment."

    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, October 18, 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)
     
      September 8,
     2018
     December 30,
     2017
    ASSETS    
    Current Assets:    
    Cash and cash equivalents $46,315  $41,889 
    Accounts receivable - net 51,051  45,491 
    Inventory - net 29,745  21,639 
    Other current assets 6,745  5,895 
    Total Current Assets 133,856  114,914 
    Property, plant and equipment - net 133,753  128,119 
    Equipment at customers - net 23,767  23,312 
    Software and intangible assets - net 15,211  16,732 
    Goodwill 34,125  31,580 
    Total Assets $340,712  $314,657 
         
    LIABILITIES AND STOCKHOLDERS' EQUITY    
    Current Liabilities:    
    Accounts payable $31,411  $25,568 
    Contract liabilities - net 231   
    Accrued salaries, wages, and benefits 4,923  6,386 
    Taxes payable 6,679  5,787 
    Other current liabilities 4,783  2,690 
    Total Current Liabilities 48,027  40,431 
    Long-term debt 28,953  28,744 
    Deferred income taxes 13,554  9,556 
    Total Liabilities $90,534  $78,731 
         
    STOCKHOLDERS' EQUITY:    
    Common stock - 26,000,000 shares authorized at $0.01 par value, 23,050,109 and 22,891,674 shares issued and outstanding at September 8, 2018 and December 30, 2017, respectively $231  $229 
    Additional paid-in capital 196,082  193,640 
    Retained earnings 53,315  41,359 
    Total Heritage-Crystal Clean, Inc. Stockholders' Equity 249,628  235,228 
    Noncontrolling interest 550  698 
    Total Equity $250,178  $235,926 
    Total Liabilities and Stockholders' Equity $340,712  $314,657 
             


    Heritage-Crystal Clean, Inc.
    Condensed Consolidated Statements of Income
    (In Thousands, Except per Share Amounts)
    (Unaudited)
     
       Third Quarter Ended, First Three Quarters Ended,
       September 8,
     2018
     September 9,
     2017
     September 8,
     2018
     September 9,
     2017
              
    Revenues        
     Service revenues $58,054  $54,048  $172,205  $162,071 
     Product revenues 41,620  29,283  110,918  88,095 
    Total revenues $99,674  $83,331  $283,123  $250,166 
              
    Operating expenses        
     Operating costs $76,045  $63,649  $220,702  $188,210 
     Selling, general, and administrative expenses 10,641  10,955  33,185  33,871 
     Depreciation and amortization 3,776  4,186  11,078  12,501 
     Other expense (income) - net 253  (3,078) 983  (11,112)
    Operating income 8,959  7,619  17,175  26,696 
    Interest expense – net 256  276  742  775 
    Income before income taxes 8,703  7,343  16,433  25,921 
    Provision for income taxes 2,284  2,586  3,996  9,361 
    Net income 6,419  4,757  12,437  16,560 
    Income attributable to noncontrolling interest 74  53  213  158 
    Net income attributable to Heritage-Crystal Clean, Inc. common stockholders $6,345  $4,704  $12,224  $16,402 
             
    Net income per share: basic $0.28  $0.21  $0.53  $0.73 
    Net income per share: diluted $0.27  $0.20  $0.52  $0.72 
             
    Number of weighted average shares outstanding: basic 23,048  22,686  23,013  22,515 
    Number of weighted average shares outstanding: diluted 23,404  22,970  23,299  22,813 
                 


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


    Third Quarter Ended,
    September 9, 2017
     
    (thousands)  Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
    Revenues        
     Service revenues $49,419  $4,629  $  $54,048 
     Product revenues 5,623  23,660    29,283 
    Total revenues $55,042  $28,289  $  $83,331 
    Operating expenses                
     Operating costs 38,298  25,351    63,649 
     Operating depreciation and amortization 1,794  1,555    3,349 
    Profit before corporate selling, general, and administrative expenses $14,950  $1,383  $  $16,333 
    Selling, general, and administrative expenses         10,955  10,955 
    Depreciation and amortization from SG&A         837  837 
    Total selling, general, and administrative expenses         $11,792  $11,792 
    Other (income) - net         (3,078) (3,078)
    Operating income             7,619 
    Interest expense – net         276  276 
    Income before income taxes             $7,343 
                     


    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 
               


    First Three Quarters Ended,
    September 9, 2017
     
    (thousands)  Environmental
    Services
     Oil Business Corporate and
    Eliminations
     Consolidated
              
    Revenues        
     Service revenues $146,135  $15,936  $  $162,071 
     Product revenues 17,215  70,880    88,095 
    Total revenues $163,350  $86,816  $  $250,166 
    Operating expenses              
     Operating costs 111,419  76,791    188,210 
     Operating depreciation and amortization 5,341  4,624    9,965 
    Profit before corporate selling, general, and administrative expenses $46,590  $5,401  $  $51,991 
    Selling, general, and administrative expenses     33,871  33,871 
    Depreciation and amortization from SG&A     2,536  2,536 
    Total selling, general, and administrative expenses     $36,407  $36,407 
    Other (income) - net     (11,112) (11,112)
    Operating income         26,696 
    Interest expense – net     775  775 
    Income before income taxes         $25,921 
                 


    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 8,
    2018
     September 9,
    2017
     September 8,
    2018
     September 9,
    2017
    Net income  $6,419  $4,757  $12,437  $16,560 
               
    Interest expense - net 256  276  742  775 
               
    Provision for income taxes 2,284  2,586  3,996  9,361 
               
    Depreciation and amortization 3,776  4,186  11,078  12,501 
               
    EBITDA (a)  $12,735  $11,805  $28,253  $39,197 
               
    Legal Fees (b)       727 
               
    Non-cash compensation (c) 1,190  616  3,060  1,962 
              
    Gain from Arbitration award (d)       (5,136)
              
    Gain from settlement with sellers of FCCE (e)       (3,600)
             
    Gain on sale of property (f)   (3,071)   (3,071)
             
    Severance (g)   1,221  639  1,221 
             
    Adjusted EBITDA (h) $13,925  $10,571  $31,952  $31,300 
               
    (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)Legal fees incurred to resolve routine and non-routine matters stemming from the acquisition of FCC Environmental and International Petroleum Corp.
      
    (c)Non-cash compensation expenses which are recorded in SG&A.
      
    (d)Gain from partial award for claims made in our arbitration related to our acquisition of FCC Environmental and International Petroleum Corp. in 2014.
      
    (e)Settlement of disputes related to the acquisition of FCC Environmental and International Petroleum Corp. of Delaware.
         
    (f)Gain from sale of a facility in Pompano Beach, Florida.   
      
    (g)Severance charges related to the departure of our COO and other employee separations.
      
    (h)


    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 provides investors and management useful information about the earnings impact on the gain on sale of property in the third fiscal quarter of 2017 compared to earnings in the third fiscal quarter of 2018.
            
        
    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)
     
     Third Quarter Ended,
        
     September 8,
    2018
     September 9,
    2017
        
    GAAP net earnings$6,345  $4,704 
        
    Gain on sale of property  (3,071)
        
    Severance of COO  1,221 
        
    Net tax effect of items above  691 
        
    Adjusted net earnings$6,345  $3,545 
        
    GAAP diluted earnings per share$0.27  $0.20 
        
    Gain on sale of property per share  (0.13)
        
    Severance of COO per share  0.05 
        
    Net tax effect per share of items above  0.03 
        
    Adjusted diluted earnings per share$0.27  $0.15 
        

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