Date: July 27, 2011
Source: Heritage-Crystal Clean, Inc.
Heritage-Crystal Clean, Inc. (Nasdaq: HCCI), a leading provider of parts cleaning and hazardous and non-hazardous waste services to small and mid-sized customers, today announced results for the second quarter of fiscal year 2011, which ended June 18, 2011.
Second quarter highlights include:
Mr. Joseph Chalhoub, President and Chief Executive Officer of Heritage-Crystal Clean, Inc. commented, "We are pleased with our second quarter, as we delivered results better than our plans. Sales of both Environmental Services and our Oil Business continued to show strength. We continue to ramp up our used oil collection services, leveraging our 67 branch locations and tens of thousands of customers. Construction of the re-refinery remains on schedule for production of lube oil near the end of the year. We have recently completed construction of the front end of the plant, and have started operational testing of this section, with the expectation that we will begin producing intermediate products during the third quarter."
Mr. Greg Ray, Chief Financial Officer and Vice President of Business Management, stated, "During the second quarter we experienced good growth across our business segments, as our branch network continued to add new accounts. Notwithstanding the improved revenue, our profit margin was less than a year ago, as much of our growth was in the Oil Business which remains unprofitable until we begin to upgrade the value of the collected used oil via re-refining. Also, escalating costs for fuel and solvent had a negative impact on our margins, which was partially mitigated by improved inventory valuations and also by our increased prices and the energy surcharges we bill to customers. The previously-announced Warrior Group acquisition made during the first quarter of 2011 added revenue for our Oil Business, and the integration of the acquired employees and customers has been proceeding as planned."
Ray added, "During the second quarter, we made an initial draw of $10 million on our bank credit facility to fund the re-refinery construction costs, and at the end of the quarter we had approximately $7.4 million of cash on hand."
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 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: our ability to complete our used oil re-refinery as anticipated; the used oil re-refinery does not perform as anticipated; we are unable to generate sufficient funds to build and support our used oil re-refinery; we do not realize the anticipated benefits from our acquisition of the Warrior Group; 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 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; 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 March 4, 2011 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 and hazardous and non-hazardous waste services to small and mid-sized customers in both the manufacturing and automotive service sectors. Our service programs include parts cleaning, containerized waste management, used oil collection, 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. Heritage-Crystal Clean, Inc. is headquartered in Elgin, Illinois, and operates through 67 branches serving over 44,000 customer locations.
Conference Call
The Company will host a conference call on Thursday July 28, 2011 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, 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 18, 2011 | January 1, 2011 | |
| ASSETS | ||
| Current Assets: | ||
| Cash and cash equivalents | $7,423 | $21,757 |
| Accounts receivable - net | 17,017 | 13,478 |
| Income tax receivables | 23 | 27 |
| Inventory - net | 17,682 | 11,647 |
| Deferred income taxes | 604 | 731 |
| Other current assets | 2,590 | 2,154 |
| Total Current Assets | 45,339 | 49,794 |
| Property, plant and equipment - net | 57,852 | 37,051 |
| Goodwill | 1,137 | — |
| Software and intangible assets - net | 3,509 | 2,727 |
| Total Assets | $107,837 | $89,572 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current Liabilities: | ||
| Accounts payable | 12,718 | 10,058 |
| Accrued salaries, wages, and benefits | 2,511 | 2,242 |
| Taxes payable | 1,136 | 913 |
| Current maturities of long-term debt | 553 | — |
| Other accrued expenses | 1,333 | 1,139 |
| Total Current Liabilities | 18,251 | 14,352 |
| Long-term debt, less current maturities | 1,591 | — |
| Note payable | 10,000 | — |
| Deferred income taxes | 1,952 | 1,676 |
| Total Liabilities | 31,794 | 16,028 |
| STOCKHOLDERS' EQUITY: | ||
| Common stock - 18,000,000 shares authorized at $0.01 par value, | ||
|
14,322,053 and 14,220,321 shares issued and outstanding at June 18, 2011 and January 1, 2011, respectively |
143 | 142 |
| Additional paid-in capital | 70,973 | 69,532 |
| Retained earnings | 4,927 | 3,870 |
| Total Stockholders' Equity | 76,043 | 73,544 |
| Total Liabilities and Stockholders' Equity | $107,837 | $89,572 |
| Heritage-Crystal Clean, Inc. Consolidated Statements of Operations (In Thousands, Except per Share Amounts) (Unaudited) |
||||
| Second Quarter Ended, | First Half Ended, | |||
| June 18, 2011 | June 19, 2010 | June 18, 2011 | June 19, 2010 | |
| Sales | $31,968 | $25,338 | $60,707 | $49,343 |
| Operating expenses -- | ||||
| Operating costs | 24,729 | 18,323 | 47,241 | 35,941 |
| Selling, general and administrative expenses | 4,815 | 4,285 | 9,356 | 8,503 |
| Depreciation and amortization | 1,215 | 1,055 | 2,325 | 2,084 |
| Loss (gain) on the disposal of fixed assets | (12) | 39 | (12) | 39 |
| Operating income | 1,221 | 1,636 | 1,797 | 2,776 |
| Interest expense - net | 10 | — | 14 | — |
| Income before income taxes | 1,211 | 1,636 | 1,783 | 2,776 |
| Provision for income taxes | 492 | 705 | 726 | 1,183 |
| Net income | $719 | $931 | 1,057 | 1,593 |
| Net income per share: basic | $0.05 | $0.09 | 0.07 | 0.15 |
| Net income per share: diluted | $0.05 | $0.08 | 0.07 | 0.15 |
| Number of weighted average shares outstanding: basic | 14,306 | 10,909 | 14,277 | 10,811 |
| Number of weighted average shares outstanding: diluted | 14,750 | 10,973 | 14,583 | 10,871 |
| Heritage-Crystal Clean, Inc. Reconciliation of Operating Segment Information (In Thousands) (Unaudited) |
||||
| Second Quarter Ended, | ||||
| June 18, 2011 | ||||
| Environmental Services | Oil Business | Corporate and Eliminations | Consolidated | |
| Sales | $27,641 | $4,327 | -- | $31,968 |
| Operating expenses | ||||
| Operating costs | 20,051 | 4,678 | -- | 24,729 |
| Operating depreciation and amortization | 959 | 89 | -- | 1,048 |
| Profit (loss) before corporate selling, general, and administrative expenses | 6,631 | (440) | 6,191 | |
| Selling, general, and administrative expenses | -- | -- | 4,816 | 4,816 |
| Depreciation and amortization from SG&A | -- | -- | 166 | 166 |
| Total selling, general, and administrative expenses | 4,982 | 4,982 | ||
| Loss from disposal of fixed asset | -- | -- | (12) | (12) |
| Operating income | 1,221 | |||
| Interest expense - net | -- | -- | 10 | 10 |
| Income before income taxes | 1,211 | |||
| Provision for income taxes | -- | -- | 492 | 492 |
| Net income | 719 | |||
| Second Quarter Ended, | ||||
| June 19, 2010 | ||||
| Environmental Services | Oil Business | Corporate and Eliminations | Consolidated | |
| Sales | 24,132 | 1,206 | -- | 25,338 |
| Operating expenses | ||||
| Operating costs | 16,609 | 1,714 | -- | 18,323 |
| Operating depreciation and amortization | 896 | 9 | -- | 905 |
| Profit (loss) before corporate selling, general, and administrative expenses | 6,627 | (517) | 6,110 | |
| Selling, general, and administrative expenses | -- | -- | 4,285 | 4,285 |
| Depreciation and amortization from SG&A | -- | -- | 150 | 150 |
| Total selling, general, and administrative expenses | 4,435 | 4,435 | ||
| Loss from disposal of fixed asset | -- | -- | 39 | 39 |
| Operating income | 1,636 | |||
| Interest expense - net | -- | -- | -- | -- |
| Income before income taxes | 1,636 | |||
| Provision for income taxes | -- | -- | 705 | 705 |
| Net income | 931 | |||
| First Half Ended, | ||||
| June 18, 2011 | ||||
| Environmental Services | Oil Business | Corporate and Eliminations | Consolidated | |
| Sales | 53,753 | 6,954 | -- | 60,707 |
| Operating expenses | ||||
| Operating costs | 39,197 | 8,044 | -- | 47,241 |
| Operating depreciation and amortization | 1,894 | 127 | -- | 2,021 |
| Profit (loss) before corporate selling, general, and administrative expenses | 12,662 | (1,217) | 11,445 | |
| Selling, general, and administrative expenses | -- | -- | 9,357 | 9,357 |
| Depreciation and amortization from SG&A | -- | -- | 303 | 303 |
| Total selling, general, and administrative expenses | 9,660 | 9,660 | ||
| Loss from disposal of fixed asset | -- | -- | (12) | (12) |
| Operating income | 1,797 | |||
| Interest expense - net | -- | -- | -- | 14 |
| Income before income taxes | 1,783 | |||
| Provision for income taxes | -- | -- | 726 | 726 |
| Net income | 1,057 | |||
| First Half Ended, | ||||
| June 19, 2010 | ||||
| Environmental Services | Oil Business | Corporate and Eliminations | Consolidated | |
| Sales | 46,896 | 2,447 | -- | 49,343 |
| Operating expenses | ||||
| Operating costs | 32,731 | 3,210 | -- | 35,941 |
| Operating depreciation and amortization | 1,771 | 17 | -- | 1,788 |
| Profit (loss) before corporate selling, general, and administrative expenses | 12,394 | (780) | 11,614 | |
| Selling, general, and administrative expenses | -- | -- | 8,503 | 8,503 |
| Depreciation and amortization from SG&A | -- | -- | 296 | 296 |
| Total selling, general, and administrative expenses | 8,799 | 8,799 | ||
| Loss from disposal of fixed asset | -- | -- | 39 | 39 |
| Operating income | 2,776 | |||
| Interest expense - net | -- | -- | -- | -- |
| Income before income taxes | 2,776 | |||
| Provision for income taxes | -- | -- | 1,183 | 1,183 |
| Net income | 1,593 | |||
Total assets by segment as well as unallocated corporate amounts as of June 18, 2011 and January 1, 2011 were as follows (in thousands):
| June 18, 2011 | January 1, 2011 | |
| Total Assets: | ||
| Environmental Services | $29,681 | $26,498 |
| Oil Business | 39,468 | 13,261 |
| Corporate | 38,688 | 49,813 |
| Total | $107,837 | $89,572 |
| 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, | First Half Ended, | |||
| (Dollars in thousands) | (Dollars in thousands) | |||
| June 18, 2011 | June 19, 2010 | June 18, 2011 | June 19, 2010 | |
| Net income | $719 | $931 | $1,057 | $1,593 |
| Interest expense - net | 10 | — | 14 | — |
| Provision for income taxes | 492 | 705 | 726 | 1,183 |
| Depreciation and amortization | 1,215 | 1,055 | 2,325 | 2,084 |
| EBITDA(a) | $2,436 | $2,691 | $4,122 | $4,860 |
| (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. | ||||
For more information, contact:
Greg Ray, Chief Financial Officer and VP Business Management
(847) 836-5670
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