Heritage-Crystal Clean, Inc. Announces 2019 Fourth Quarter and Full Year Financial Results
Fourth Quarter Highlights:
Total Company revenue for the fourth quarter of 2019 was a record $138.8 million, a 9.3% increase from the prior year quarterEnvironmental Services segment revenue was a record $96.9 million, a 12.8% increase compared to the prior year quarterOil Business Segment revenue for the fourth quarter of 2019 was a record $42.0 millionFull Year Highlights:Total Company revenue for fiscal 2019 was a record $444.4 million, an 8.3% increase over 2018Environmental Services segment 2019 revenue was a record $302.5 million, an increase of 11.6% compared to the prior yearEnvironmental Services segment profit before SG&A was a record $75.7 million, an increase of $6.3 million compared to the prior yearOil Business Segment 2019 revenue was a record $141.9 millionELGIN, Ill., March 02, 2020 (GLOBE NEWSWIRE) — Heritage-Crystal Clean, Inc. (Nasdaq: HCCI), a leading provider of parts cleaning, hazardous and non-hazardous waste services, used oil re-refining, antifreeze recycling and field services primarily focused on small and mid-sized customers, today announced results for the fourth quarter of fiscal 2019 and for the full fiscal year, which ended December 28, 2019.Fourth Quarter ReviewRevenue for the fourth quarter of 2019 was $138.8 million compared to $127.1 million for the same quarter of 2018, an increase of 9.3%.Operating margin increased to 18.6% from 16.1% in the fourth quarter of 2018 mainly due to higher revenue along with lower shutdown maintenance and catalyst costs at our re-refinery, partially offset by higher disposal, healthcare and fleet repair costs compared to the year-ago quarter. Our SG&A expense as a percentage of revenue dropped to 12.1% from 12.2% of revenue in the fourth quarter of 2018 mainly due to higher revenue, lower professional services fees, and lower share based compensation expense.During the fourth quarter of 2019, the Company entered into a settlement to resolve claims made against us in a class action litigation pertaining to fuel surcharges. This brings to a close litigation which began almost five years ago. In conjunction with the settlement the Company took a charge of $11.0 million which negatively impacted diluted earnings per share by $0.35.Net loss attributable to common shareholders was $(2.2) million, or $(0.09) per diluted share, for the fourth quarter of 2019. This compares to net income attributable to common shareholders of $2.5 million, or $0.11 per diluted share in the year earlier quarter. Excluding the settlement charge discussed above, net income attributable to common shareholders was $6.1 million or $0.26 per diluted share. See our reconciliations of Net (loss) income and Net (loss) income per share below.Fiscal 2019 ReviewIn 2019, we generated $444.4 million of revenue compared to prior year revenue of $410.2 million, an increase of $34.2 million, or 8.3%, driven by strong growth in all of our Environmental Services segment businesses.Operating margin of 18.1% remained flat compared to 2018 as higher revenue was partially offset by higher healthcare, fleet repair and disposal costs. SG&A expense for fiscal 2019 was 12.2% of revenue, down slightly from 12.4% in fiscal 2018.Net income attributable to common shareholders for fiscal 2019 was $8.4 million, or $0.36 per diluted share compared to net income of $14.7 million, or $0.63 per diluted share for fiscal 2018. Excluding the charge resulting from the aforementioned settlement, net income attributable to common shareholders for the year was $16.8 million, or $0.72 per diluted share.SegmentsOur Environmental Services segment includes parts cleaning, containerized waste, vacuum services, antifreeze recycling, and field services. The Environmental Services segment reported record revenue of $96.9 million, an increase of $11.0 million, or 12.8%, during the quarter compared to the fourth quarter of fiscal 2018. The increase in revenue was driven mainly by strong growth in our field services, containerized waste, and antifreeze recycling businesses. Our profit before SG&A expense as a percentage of revenue was 25.1% compared to 27.3% in the year ago quarter. Higher healthcare, fleet repair and disposal costs all contributed to the decline in operating margin. During fiscal 2019, Environmental Services segment revenue increased $31.4 million, or 11.6%, compared to fiscal 2018, while our profit before SG&A increased $6.3 million or 9.1%.President and CEO Brian Recatto commented, “We are very pleased to deliver another quarter of double-digit year-over-year revenue growth in this segment which underscores the execution of our sales growth initiatives. We expect to continue this momentum in 2020.”Our Oil Business segment includes used oil collection activities, sales of recycled fuel oil, and re-refining activities. During the fourth quarter of fiscal 2019, Oil Business revenues increased 1.9% to $42.0 million compared to the fourth quarter of fiscal 2018. Oil Business segment operating margin improved 10.6 percentage points to 3.5% in the fourth quarter of 2019 compared to (7.1%) during the same period of 2018. The increase in margin was mainly due to less re-refinery downtime which led to lower shut-down expenses as well as lower catalyst costs compared to the year-ago quarter. Full year 2019 revenue was up $2.8 million compared to fiscal 2018, while operating margin of 3.3% was slightly below that of fiscal 2018.Recatto commented, “We were able to deliver significant improvement in operating margin during the quarter compared to the fourth quarter of 2018 due to record base oil production which helped offset lower base oil prices. With consistent operation of our re-refinery, we have the opportunity to generate improved operating margin in the Oil Business segment during 2020.”Safe Harbor StatementAll 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, including a drop in the price of crude oil, the selling price of lubricating base oil, solvent, fuel, energy, and commodity costs; 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 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; the impact of legal proceedings and class action litigation on us and our ability to estimate the cash payments we will make under litigation settlements; our ability to effectively manage our network of branch locations; the control of The Heritage Group over the Company; and the risks identified in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2019. 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, vacuum truck services and waste antifreeze collection and recycling. 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 89 branches serving over 90,000 customer locations.Conference CallThe Company will host a conference call on Tuesday, March 3, 2020 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://crystal-clean.com/investor-relations/, 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.CONTACT
Mark DeVita, Chief Financial Officer, at (847) 836-5670Heritage-Crystal Clean, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)Heritage-Crystal Clean, Inc.
Condensed Consolidated Statements of Operations
(In Thousands, Except per Share Amounts)
(Unaudited)Heritage-Crystal Clean, Inc.
Reconciliation of Operating Segment Information