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Heritage-Crystal Clean, Inc. Announces 2012 Fourth Quarter and Full Year Financial Results

Heritage-Crystal Clean, Inc. Logo

ELGIN, Ill., Feb. 20, 2013 (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 fourth quarter of fiscal 2012 and for the full fiscal year, which ended December 29, 2012.

Fourth quarter highlights include:

  • Revenues increased 41.4%, to $77.6 million, compared to $54.9 million in the fourth quarter of fiscal 2011. This increase was due to organic growth in the Environmental Services segment and the ramp up of the Oil Business segment.
  • Loss per share was $0.01 in the fourth quarter of fiscal 2012 compared to a loss of $0.01 in the fourth quarter of fiscal 2011.
  • Our Environmental Services segment includes parts cleaning, containerized waste, and vacuum services. During the fourth quarter, Environmental Services revenues increased $6.3 million, or 16.6% compared to the fourth quarter of fiscal 2011, primarily from organic growth. In addition, revenues for the Environmental Services segment in the fourth quarter include $1.2 million in revenues from the licensing of one of our parts washer designs for both fiscal 2012 and prior years.
  • Same-branch sales for our Environmental Services segment increased 9.3% for the quarter, measured for the 66 branches that were in operation throughout both the fourth quarters of fiscal 2012 and 2011. Excluding the three branches in this group that gave up customers to new branch openings, the remaining 63 branches experienced an increase of $4.4 million, or 12.8% from fiscal 2011 to fiscal 2012.
  • Average sales per working day in our Environmental Services segment was approximately $570,000, compared to $495,000 in the fourth quarter of fiscal 2011 and compared to $555,000 in the third quarter of fiscal 2012.
  • Our Oil Business segment includes used oil collection and re-refining activities. During the fourth quarter of fiscal 2012, Oil Business revenues increased $16.4 million, to $33.2 million from $16.8 million in the fourth quarter of fiscal 2011, reflecting revenues from sales of base oil produced in our used oil re-refinery in Indianapolis, which had only produced intermediate products and byproducts in the fourth quarter of fiscal 2011.

Fiscal year 2012 highlights include:

  • For fiscal 2012, revenues increased 65.2% to $252.5 million, compared to $152.9 million in fiscal 2011. This increase was due to organic growth in the Environmental Services segment and production of re-refined base oil and byproducts at the used oil re-refinery.
  • Basic and diluted earnings per share was $0.13 for fiscal 2012, compared to basic and diluted EPS of $0.10 in fiscal 2011.
  • During fiscal 2012, Environmental Services segment revenues increased $19.6 million, or 16.4% when compared to fiscal 2011.
  • For fiscal 2012 Environmental Services segment same-branch sales increased 11.9%, measured for the 66 branches that were in operation throughout both fiscal 2012 and fiscal 2011. Excluding the three branches in this group that gave up customers to new branch openings, the remaining 63 branches experienced an increase of $15.9 million, or 14.9% from fiscal 2011 to fiscal 2012.
  • Average sales per working day in our Environmental Services segment was approximately $550,000, compared to $470,000 in fiscal 2011.
  • During fiscal 2012, Oil Business revenues increased $80.0 million, or 240%.

The Company's Founder, President, and Chief Executive Officer, Joe Chalhoub, commented, "The fourth quarter contained both achievements and challenges for the Company. In the Environmental Services segment we were able to continue to grow revenues at a double digit rate versus the prior year's fourth quarter. We also improved our margin in this segment compared to the third quarter of fiscal 2012. Commodity pricing continued to negatively impact the revenue and margin performance in our Oil Business segment. We also continue to work on improving the efficiency of our used oil collection routes, reducing the cost of transportation, and improving the efficiency of our re-refinery operations."

Chalhoub added: "We continue to see opportunities in both of our business segments. We expect investments made in 2011 and 2012 will allow us to continue strong growth in our Environmental Services business during 2013. At the beginning of fiscal 2013, the Company acquired a controlling interest in Mirachem, LLC (Mirachem). The transaction involved an initial payment of approximately $2.5 million along with a two-year note payable for approximately $0.8 million. Mirachem supplies the Company with a line of aqueous cleaning products used in our parts cleaning service. With the Mirachem chemistry and our patented aqueous parts cleaning equipment, we are very excited about the potential of our aqueous parts cleaning service offering.

"We are also excited to announce that earlier this month we obtained the required air permit to allow us to expand the annual capacity at our Indianapolis, Indiana re-refinery from 50 million to 75 million gallons. This should allow us to improve our utilization of resources and the profitability of our Oil Business segment."

Mark DeVita, Chief Financial Officer stated, "We are pleased to report that during the fourth quarter along with our organic top-line growth in the Environmental Services segment we improved our margin in this segment from 18.9% in the third quarter to 22.8% in the fourth quarter.

"In our Oil Business the fourth quarter average spot price for Group II base oil declined by approximately 5% compared to the third quarter. This deterioration follows a decline of approximately 10% from the second quarter to the third quarter. This trend negatively impacted our segment revenue and margin. The average spot price for Group II base oil declined further at the beginning of 2013. We believe that current base oil pricing and the resulting spread between crude oil and lube oil prices reflect conditions that are not sustainable in the long run for the virgin production of lube oil from crude."

DeVita added: "During the quarter our SG&A as a percentage of revenue increased by 2.3% compared to the third quarter. The increase was primarily due to $1.1 million of costs associated with the evaluation of an unrealized potential acquisition during the quarter."

DeVita also added: "We are pleased with our balance sheet as of the end of fiscal 2012, as we ended the year with $47.8 million in cash and cash equivalents and only $20.9 million in total debt."

Safe Harbor Statement

All references to the "Company," "we," "our," and "us" refer to Heritage-Crystal Clean, Inc., and its subsidiary.

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," "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: the used oil re-refinery does not perform as anticipated; we are unable to collect sufficient used oil to run our used oil re-refinery at full capacity; the used oil re-refinery may not generate the operating results that we anticipate; we do not realize the anticipated benefits from our acquisitions; our ability to comply with the extensive environmental, health and safety and employment laws and regulations that our Company is subject to; changes in environmental laws that affect our business model; competition; claims relating to our handling of hazardous substances; the limited demand for our used solvent; our dependency on key employees; our ability to effectively manage our extended network of branch locations; warranty expense and liability claims; personal injury litigation; dependency of suppliers; economic conditions including conditions like those experienced in the recent recession and financial crisis, and downturns in the business cycles of automotive repair shops, industrial manufacturing business and small businesses in general; increased solvent, fuel and energy costs and volatility in the price of crude oil; increased market supply or decreased demand for base oil; volatility in the price of base oil; the control of The Heritage Group over our Company; and the risks identified in our Annual Report on Form 10-K filed with the SEC on February 29, 2012 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 to small and mid-sized customers in both the manufacturing and vehicle service sectors. Our service programs include parts cleaning, containerized waste management, used oil collection and re-refining, and vacuum truck 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 manufacturers, such as metal product fabricators and printers. 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. Heritage-Crystal Clean, Inc. is headquartered in Elgin, Illinois, and operates through 71 branches serving over 86,000 customer locations.

The Heritage-Crystal Clean, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4974

Conference Call

The Company will host a conference call on Thursday, February 21, 2013 at 9:30 AM Central Time, during which management will make 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://www.crystal-clean.com/investor/FinancialReleases.asp, and can participate in the call by dialing (720) 545-0014.

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

Heritage-Crystal Clean, Inc.
Consolidated Balance Sheets
(In Thousands, Except Share and Par Value Amounts)
(Unaudited)
December 29,
2012
December 31,
2011
ASSETS
Current Assets:
Cash and cash equivalents $ 47,766 $ 2,186
Accounts receivable - net 23,338 17,047
Inventory - net 27,231 21,260
Deferred income taxes 1,055 986
Income tax receivables - current 648 1,040
Other current assets 2,821 1,955
Total Current Assets 102,859 44,474
Property, plant and equipment - net 72,246 66,650
Equipment at customers - net 17,946 16,408
Software and intangible assets - net 4,555 4,469
Goodwill 1,801 1,801
Income tax receivables - noncurrent 254
Total Assets $ 199,407 $ 134,056
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 16,509 $ 21,266
Accrued salaries, wages, and benefits 2,544 2,930
Taxes payable 1,066 1,121
Current maturities of long-term debt and term loan 1,803 1,053
Other accrued expenses 2,512 2,562
Total Current Liabilities 24,434 28,932
Term loan, less current maturities 18,250 19,500
Long-term debt, less current maturities 828 1,338
Contingent consideration, less current portion 451 1,027
Deferred income taxes 6,053 4,706
Total Liabilities 50,016 55,503
STOCKHOLDERS' EQUITY:
Common stock - 22,000,000 shares authorized at $0.01 par value, 18,068,852 and 14,448,331 shares issued and outstanding at December 29, 2012 and December 31, 2011, respectively $ 181 $ 144
Additional paid-in capital 141,612 73,065
Retained earnings 7,598 5,344
Total Stockholders' Equity 149,391 78,553
Total Liabilities and Stockholders' Equity $ 199,407 $ 134,056
Heritage-Crystal Clean, Inc.
Consolidated Statements of Income
(In Thousands, Except per Share Amounts)
(Unaudited)
Fourth Quarter Ended, For the Fiscal Years Ended,
December 29,
2012
December 31,
2011
December 29,
2012
December 31,
2011
Revenues
Product revenues $ 34,966 $ 18,479 $ 119,470 $ 39,149
Service revenues 42,679 36,428 133,021 113,709
Total revenues $ 77,645 $ 54,907 $ 252,491 $ 152,858
Operating expenses
Operating costs $ 66,605 $ 46,562 $ 213,568 $ 124,000
Selling, general, and administrative expenses 8,637 6,473 26,194 20,715
Depreciation and amortization 2,554 2,124 8,141 5,657
Other expense (income) - net (4) 1 6 (10)
Operating income (147) (253) 4,582 2,496
Interest expense – net 140 14 585 37
Income (loss) before income taxes (287) (267) 3,997 2,459
Provision for income taxes (19) (76) 1,743 985
Net income (loss) $ (268) $ (191) $ 2,254 $ 1,474
Net income (loss) per share: basic $ (0.01) $ (0.01) $ 0.13 $ 0.10
Net income (loss) per share: diluted $ (0.01) $ (0.01) $ 0.13 $ 0.10
Number of weighted average shares outstanding: basic 18,067 14,357 16,921 14,313
Number of weighted average shares outstanding: diluted 18,067 14,357 17,363 14,710
Heritage-Crystal Clean, Inc.
Reconciliation of Operating Segment Information
(In Thousands)
(Unaudited)
For the Quarter Ended,
December 29, 2012
Environmental Corporate and
Services Oil Business Eliminations Consolidated
Revenues
Product revenues $ 3,213 $ 31,753 $ 34,966
Service revenues 41,242 1,437 42,679
Total revenues $ 44,455 $ 33,190 $ 77,645
Operating expenses
Operating costs 31,941 34,664 66,605
Operating depreciation and amortization 1,420 938 2,358
Profit (loss) before corporate selling, general, and administrative expenses 11,094 (2,412) 8,682
Selling, general, and administrative expenses 8,637 8,637
Depreciation and amortization from SG&A 196 196
Total selling, general, and administrative expenses 8,833 8,833
Other expense (income) - net (4) (4)
Operating income (loss) (147)
Interest expense - net 140 140
Income (loss) before income taxes (287)
Provision for income taxes (19) (19)
Net income (loss) $ (268)
For the Quarter Ended,
December 31, 2011
Environmental Corporate and
Services Oil Business Eliminations Consolidated
Revenues
Product revenues $ 2,845 $ 15,634 $ 18,479
Service revenues 35,285 1,143 36,428
Total revenues $ 38,130 $ 16,777 $ 54,907
Operating expenses
Operating costs 29,409 17,153 46,562
Operating depreciation and amortization 1,347 588 1,935
Profit (loss) before corporate selling, general, and administrative expenses 7,374 (964) 6,410
Selling, general, and administrative expenses 6,473 6,473
Depreciation and amortization from SG&A 189 189
Total selling, general, and administrative expenses 6,662 6,662
Other expense (income) - net 1 1
Operating income (loss) (253)
Interest expense - net 14 14
Income (loss) before income taxes (267)
Provision for income taxes (76) (76)
Net income (loss) $ (191)
For the Fiscal Years Ended,
December 29, 2012
Environmental Corporate and
Services Oil Business Eliminations Consolidated
Revenues
Product revenues $ 11,025 $ 108,445 $ 119,470
Service revenues 128,129 4,892 133,021
Total revenues $ 139,154 $ 113,337 $ 252,491
Operating expenses
Operating costs 104,994 108,574 213,568
Operating depreciation and amortization 4,615 2,894 7,509
Profit before corporate selling, general, and administrative expenses 29,545 1,869 31,414
Selling, general, and administrative expenses 26,194 26,194
Depreciation and amortization from SG&A 632 632
Total selling, general, and administrative expenses 26,826 26,826
Other expense (income) - net 6 6
Operating income 4,582
Interest expense - net 585 585
Income before income taxes 3,997
Provision for income taxes 1,743 1,743
Net income $ 2,254
For the Fiscal Years Ended,
December 31, 2011
Environmental Corporate and
Services Oil Business Eliminations Consolidated
Revenues
Product revenues $ 9,064 $ 30,085 $ 39,149
Service revenues 110,448 3,261 113,709
Total revenues $ 119,512 $ 33,346 $ 152,858
Operating expenses
Operating costs 90,751 33,249 124,000
Operating depreciation and amortization 4,218 805 5,023
Profit (loss) before corporate selling, general, and administrative expenses 24,543 (708) 23,835
Selling, general, and administrative expenses 20,715 20,715
Depreciation and amortization from SG&A 634 634
Total selling, general, and administrative expenses 21,349 21,349
Other expense (income) - net (10) (10)
Operating income 2,496
Interest expense - net 37 37
Income before income taxes 2,459
Provision for income taxes 985 985
Net income $ 1,474

Total assets by segment as of December 29, 2012 and December 31, 2011 were as follows (in thousands):

December 29,
2012
December 31,
2011
Total Assets:
Environmental Services $ 40,932 $ 32,208
Oil Business 80,529 67,008
Unallocated Corporate Assets 77,946 34,840
Total $ 199,407 $ 134,056

Segment assets for the Environmental Services and Oil Business segments consist of property, plant, and equipment, intangible assets, and inventories allocated to each segment. Assets for the Corporate unallocated amounts consist of property, plant, and equipment used at the Corporate headquarters, as well as cash, accounts receivable, and net deferred tax assets.

Heritage-Crystal Clean, Inc.
Reconciliation of our Net Income Determined in Accordance with U.S. GAAP to Earnings Before
Interest, Taxes, Depreciation & Amortization (EBITDA)
(Unaudited)
Fourth Quarter Ended, For the Fiscal Year Ended,
(Dollars in Thousands) (Dollars in Thousands)
December 29,
2012
December 31,
2011
December 29,
2012
December 31,
2011
Net income (loss) $ (268) $ (191) $ 2,254 $ 1,474
Interest expense - net 140 14 585 37
Provision for income taxes (19) (76) 1,743 985
Depreciation and amortization 2,554 2,124 8,141 5,657
EBITDA(a) $ 2,407 $ 1,871 $ 12,723 $ 8,153
(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.

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

Source:Heritage-Crystal Clean, Inc.