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Heritage-Crystal Clean, Inc. Announces 2013 Second Quarter Financial Results

Heritage-Crystal Clean, Inc. Logo

ELGIN, Ill., July 24, 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 second quarter of fiscal 2013, which ended June 15, 2013.

Second quarter highlights include:

  • Revenues increased 2.1%, to $63.6 million, compared to $62.3 million in the second quarter of fiscal 2012. For the first half of fiscal 2013, revenues increased 9.6% to $123.6 million, compared to $112.8 million in the first half of fiscal 2012. This increase was due to organic growth in the Environmental Services segment and the ramp up of the Oil Business segment.
  • Our Environmental Services segment includes parts cleaning, containerized waste, and vacuum services. During the second quarter, Environmental Services revenues increased $3.8 million, or 11.8% compared to the second quarter of fiscal 2012, primarily from organic growth. For the first half of fiscal 2013, Environmental Services revenues increased $8.1 million, or 12.9% compared to the same period in fiscal 2012.
  • Same-branch revenues for our Environmental Services segment increased 9.6% for the quarter, measured for the 70 branches that were in operation throughout both the second quarters of fiscal 2013 and 2012. Excluding the branches in this group that gave up customers to new branch openings, the remaining 67 branches experienced an increase of 10.5% from the second quarter of fiscal 2012 to the second quarter of fiscal 2013. On a year-to-date basis, same branch sales increased 10.7%, for the 70 branches that were in operation during both years. Excluding the branches in this group that gave up customers to new branch openings, the remaining 67 branches experienced an increase of 11.4% for the first half of fiscal 2013.
  • Average revenues per working day in the second quarter of fiscal 2013 in our Environmental Services segment were approximately $600,000, compared to $545,000 in the second quarter of fiscal 2012 and compared to $580,000 in the first quarter of fiscal 2013. Average revenues per working day in this segment were $590,000 for the first half of fiscal 2013.
  • Our Oil Business segment includes used oil collection and re-refining activities. During the second quarter of fiscal 2013, Oil Business revenues decreased $2.5 million, to $27.7 million from $30.2 million in the second quarter of fiscal 2012, as a result of lower base oil pricing. For the first half of fiscal 2013, Oil Business revenues increased $2.7 million, or 5.4%, from the first half of fiscal 2012 from increased activity at the used oil re-refinery in the first half of fiscal 2013.
  • Net income for the second quarter was $1.0 million compared to $1.2 million for the year earlier quarter. Net income for the first half of 2013 was $0.6 million compared to $1.5 million for the first half of 2012. Earnings per share was $0.06 in the second quarter of fiscal 2013 compared to $0.07 in the second quarter of fiscal 2012. Earnings per share for the first half of fiscal 2013 was $0.03, compared to basic earnings per share of $0.10 in the first half of fiscal 2012.

The Company's Founder, President, and Chief Executive Officer, Joe Chalhoub, commented, "We continued to improve the performance of our Environmental Services segment during the second quarter. We continued growing our revenue in this segment at a double digit rate during the quarter and we are especially pleased that we continued improving our segment margin during the quarter as well."

Chalhoub added: "We also improved our profitability in the Oil Business segment during the quarter compared to the first quarter of 2013. We were able to grow our used oil collection volume compared to the first quarter and we improved the efficiency of our transportation network. During the second quarter we achieved record base oil production at 93% of our re-refinery's current name plate capacity."

Mark DeVita, Chief Financial Officer, stated, "The Environmental Services segment delivered revenue growth of over 11% during the second quarter and a margin before corporate SG&A of 27.8% compared to 22.5% in the second quarter of 2012. This represents our third straight quarter of improved margin in this segment."

DeVita added: "In the Oil Business segment the average price for the type of base oil we sell increased moderately from the first quarter to the second quarter. The minor increase in base oil selling price along with improved efficiency in our oil collection and transportation network helped us reduce our negative margin in this segment during the second quarter compared to the first quarter, but it was not enough to allow us to break-even before corporate SG&A expense. Our results continue to be negatively impacted by the prevailing market prices which have affected this segment beginning in the third quarter of 2012."

DeVita also added: "Our balance sheet remains strong as of the end of the second quarter of fiscal 2013, as we ended the quarter with $41.0 million in cash and cash equivalents and only $21.5 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: volatility in the price of base oil; increased solvent, fuel, and energy costs and volatility in the price of crude oil; increased market supply or decreased demand for base oil; the used oil re-refinery does not perform as anticipated; the used oil re-refinery may not generate the operating results that we anticipate; changes in environmental laws that affect our business model; our ability to comply with the extensive environmental, health, and safety and employment laws and regulations that our Company is subject to; competition; 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; dependency on suppliers; our dependency on key employees; we do not realize the anticipated benefits from our acquisitions; claims relating to our handling of hazardous substances; the limited demand for our used solvent; our ability to effectively manage our extended network of branch locations; warranty expense and liability claims; personal injury litigation; 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 27, 2013 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 74 branches serving over 91,000 customer locations.

Conference Call

The Company will host a conference call on Thursday July 25, 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)
June 15,
2013
December 29,
2012
ASSETS
Current Assets:
Cash and cash equivalents $ 40,984 $ 47,766
Accounts receivable - net 27,254 23,338
Inventory - net 29,444 27,231
Deferred income taxes 759 759
Income tax receivables - current 648
Other current assets 3,417 2,821
Total Current Assets 101,858 102,563
Property, plant and equipment - net 74,464 72,246
Equipment at customers - net 18,653 17,946
Software and intangible assets - net 6,970 4,555
Goodwill 2,610 1,801
Total Assets $ 204,555 $ 199,111
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 17,355 $ 16,509
Accrued salaries, wages, and benefits 3,542 2,544
Taxes payable 1,531 1,066
Current maturities of long-term debt and term loan 2,071 1,803
Other accrued expenses 2,556 2,512
Total Current Liabilities 27,055 24,434
Term loan, less current maturities 18,625 18,250
Long-term debt, less current maturities 844 828
Contingent consideration, less current portion 289 451
Deferred income taxes 6,134 5,757
Total Liabilities $ 52,947 $ 49,720
STOCKHOLDERS' EQUITY:
Common stock - 22,000,000 shares authorized at $0.01 par value, 18,152,691 and 18,068,852 shares issued and outstanding at June 15, 2013 and December 29, 2012, respectively $ 182 $ 181
Additional paid-in capital 142,357 141,612
Retained earnings 8,189 7,598
Total Heritage-Crystal Clean, Inc. Stockholders' Equity 150,728 149,391
Noncontrolling Interest 880
Total Equity 151,608 149,391
Total Liabilities and Stockholders' Equity $ 204,555 $ 199,111
Heritage-Crystal Clean, Inc.
Consolidated Statements of Income
(In Thousands, Except per Share Amounts)
(Unaudited)
Second Quarter Ended, First Half Ended,
June 15,
2013
June 16,
2012
June 15,
2013
June 16,
2012
Revenues
Product revenues $ 28,906 $ 31,941 $ 55,464 $ 53,157
Service revenues 34,644 30,330 68,093 59,623
Total revenues $ 63,550 $ 62,271 $ 123,557 $ 112,780
Operating expenses
Operating costs $ 52,201 $ 51,908 $ 104,487 $ 94,245
Selling, general, and administrative expenses 7,049 6,237 13,640 11,994
Depreciation and amortization 2,163 1,911 4,022 3,683
Other expense (income) - net 101 (2) 93 (2)
Operating income 2,036 2,217 1,315 2,860
Interest expense – net 107 146 213 333
Income before income taxes 1,929 2,071 1,102 2,527
Provision for income taxes 872 853 465 1,039
Net income 1,057 1,218 637 1,488
Income attributable to noncontrolling interest 26 46
Net income attributable to Heritage-Crystal Clean, Inc. common stockholders $ 1,031 $ 1,218 $ 591 $ 1,488
Net income per share: basic $ 0.06 $ 0.07 $ 0.03 $ 0.10
Net income per share: diluted $ 0.06 $ 0.07 $ 0.03 $ 0.09
Number of weighted average shares outstanding: basic 18,138 16,689 18,125 15,588
Number of weighted average shares outstanding: diluted 18,456 17,140 18,449 16,050
Heritage-Crystal Clean, Inc.
Segment Information
(Unaudited)
Second Quarter Ended,
June 15, 2013
Environmental
Services

Oil Business
Corporate and
Eliminations

Consolidated
Revenues
Product revenues $ 2,853 $ 26,053 $ — $ 28,906
Service revenues 32,980 1,664 34,644
Total revenues $ 35,833 $ 27,717 $ — $ 63,550
Operating expenses
Operating costs 24,792 27,409 52,201
Operating depreciation and amortization 1,079 824 1,903
Profit (loss) before corporate selling, general, and administrative expenses $ 9,962 $ (516) $ — $ 9,446
Selling, general, and administrative expenses 7,049 7,049
Depreciation and amortization from SG&A 260 260
Total selling, general, and administrative expenses 7,309 7,309
Other expense - net 101 101
Operating income 2,036
Interest expense – net 107 107
Income before taxes $ 1,929
Second Quarter Ended,
June 16, 2012
Environmental
Services

Oil Business
Corporate and
Eliminations

Consolidated
Revenues
Product revenues $ 2,832 $ 29,109 $ — $ 31,941
Service revenues 29,215 1,115 30,330
Total revenues $ 32,047 $ 30,224 $ — $ 62,271
Operating expenses
Operating costs 23,769 28,139 51,908
Operating depreciation and amortization 1,079 688 1,767
Profit before corporate selling, general, and administrative expenses $ 7,199 $ 1,397 $ — $ 8,596
Selling, general, and administrative expenses 6,237 6,237
Depreciation and amortization from SG&A 144 144
Total selling, general, and administrative expenses 6,381 6,381
Other income - net (2) (2)
Operating income 2,217
Interest expense – net 146 146
Income before income taxes $ 2,071
First Half Ended,
June 15, 2013
Environmental
Services

Oil Business
Corporate and
Eliminations

Consolidated
Revenues
Product revenues $ 5,523 $ 49,941 $ — $ 55,464
Service revenues 65,101 2,992 68,093
Total revenues $ 70,624 $ 52,933 $ — $ 123,557
Operating expenses
Operating costs 50,340 54,147 104,487
Operating depreciation and amortization 2,160 1,438 3,598
Profit (loss) before corporate selling, general, and administrative expenses $ 18,124 $ (2,652) $ — $ 15,472
Selling, general, and administrative expenses 13,640 13,640
Depreciation and amortization from SG&A 424 424
Total selling, general, and administrative expenses 14,064 14,064
Other expense - net 93 93
Operating income 1,315
Interest expense – net 213 213
Income before taxes $ 1,102
First Half Ended,
June 16, 2012
Environmental
Services

Oil Business
Corporate and
Eliminations

Consolidated
Revenues
Product revenues $ 5,175 $ 47,982 $ — $ 53,157
Service revenues 57,385 2,238 59,623
Total revenues $ 62,560 $ 50,220 $ — $ 112,780
Operating expenses
Operating costs 48,068 46,177 94,245
Operating depreciation and amortization 2,111 1,291 3,402
Profit before corporate selling, general, and administrative expenses $ 12,381 $ 2,752 $ — $ 15,133
Selling, general, and administrative expenses 11,994 11,994
Depreciation and amortization from SG&A 281 281
Total selling, general, and administrative expenses 12,275 12,275
Other income - net (2) (2)
Operating income 2,860
Interest expense – net 333 333
Income before income taxes $ 2,527

Total assets by segment as of June 15, 2013 and December 29, 2012 were as follows (in thousands):

June 15, 2013 December 29, 2012
Total Assets:
Environmental Services $ 64,019 $ 57,092
Oil Business 93,017 87,222
Unallocated Corporate Assets 47,519 54,797
Total $ 204,555 $ 199,111

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 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)
Second Quarter Ended,
(Dollars in Thousands)
First Half Ended,
(Dollars in Thousands)
June 15, 2013 June 16, 2012 June 15, 2013 June 16, 2012
Net income $ 1,057 $ 1,218 $ 637 $ 1,488
Interest expense - net 107 146 213 333
Provision for income taxes 872 853 465 1,039
Depreciation and amortization 2,163 1,911 4,022 3,683
EBITDA(*) $ 4,199 $ 4,128 $ 5,337 $ 6,543
* 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.