Clean Harbors, Inc. ("Clean Harbors") (NYSE: CLH), the leading provider of environmental, energy and industrial services throughout North America, today announced financial results for its fiscal third quarter ended September 30, 2015.

"Based on extensive emergency response activity and strong contributions from several businesses, Clean Harbors delivered the highest quarterly Adjusted EBITDA in our history," said Alan S. McKim, Chairman and Chief Executive Officer. "Our third-quarter results, which were in line with our previously announced guidance, were achieved despite considerable headwinds. These include weakness in the energy sector, declines in base oil pricing and the effects of a strong U.S. dollar on some domestic customers who rely on exporting, as well as its impact on foreign currency translation."

Revenues for the third quarter of 2015 were $893.4 million, up 5% from $851.5 million in the same period in 2014. Income from operations was $94.0 million in the third quarter of 2015, compared with a loss from operations for the third quarter of 2014 of $42.7 million, which included a non-cash, pre-tax goodwill impairment charge of $123.4 million. Excluding the impairment charge, the Company reported adjusted income from operations for the third quarter of 2014 of $80.7 million.

Third-quarter 2015 net income was $40.2 million, or $0.69 per diluted share, which includes $2.3 million of pre-tax integration and severance costs. This compares with a third-quarter 2014 net loss of $93.3 million, or $1.55 per share, which included the $123.4 million non-cash, pre-tax impairment charge, as well as $1.8 million of pre-tax integration and severance costs. Excluding the impairment charge, the Company reported adjusted net income for the third quarter of 2014 of $27.4 million, or $0.45 per diluted share.

Adjusted EBITDA (see description below) in the third quarter of 2015 increased 8% to a record $165.6 million from $153.4 million in the same period of 2014. Adjusted EBITDA margin rose 50 basis points to 18.5%, compared with 18.0% in the third quarter of 2014.

Comments on the Third Quarter

"We generated nearly $145 million in emergency response work during the third quarter," McKim said. "This sizeable emergency response revenue produced substantial growth in our Industrial and Field Services segment, which also benefited from an increase in turnaround activity at U.S. refineries. SK Environmental Services again contributed to our growth in profitability, posting a 30% increase that reflected volume gains, as well as the addition of Thermo Fluids (TFI). The growth in these segments more than offset the year-over-year decreases we experienced in our other businesses.

"Technical Services declined in both revenue and profitability from a year ago due to a reduction in oil and gas production waste streams, waste project deferrals, reduction in pricing of our recycled products and lower volumes from some key verticals, including Chemicals. Landfill volumes were down 28% year-over-year. However, increases in our drum volume and in some of our bulk business enabled us to achieve incineration utilization of 92% in the quarter compared to 90% a year ago. Profitability in our recently rebranded Kleen Performance Products segment - formerly Oil Re-refining and Recycling - was down as multiple declines in base oil pricing compressed margins. As expected, profitability in our Oil and Gas Field Services and Lodging Services segments fell as a result of the continued weakness in the energy market, particularly in the Oil Sands region."

Business Outlook and Financial Guidance

"The external challenges we are facing this year may be with us for some time," McKim said. "As a result, we are taking aggressive action to reduce our operating expenses and realign our cost structure to succeed in an environment that has been materially changed by the low price of crude oil and resulting slowdown, particularly in Western Canada. While we are not providing specific 2016 guidance at this time, as we enter our budgeting process, our goal will be to meet or exceed this year's Adjusted EBITDA results in 2016. In conjunction with that goal, we are setting a target of $100 million in cost takeouts that will be achieved over the course of the next year through reduced G&A spending, office and real estate consolidation, and gains in operational efficiencies. We will carefully manage down costs throughout our organization. At the same time, we will continue to seek opportunities for profitable growth through strategic investments and selective acquisitions.

"For the fourth quarter of 2015, we expect ongoing market headwinds to continue, offsetting the progress we are achieving in several segments," McKim said. "During the fourth quarter, we anticipate profitable year-over-year growth in SK Environmental Services, Kleen Performance Products and Industrial and Field Services. Kleen Performance Products, in particular, will benefit from our ongoing efforts to lower our transportation costs and from the full quarter effect of the Charge-for-Oil (CFO) initiative we launched in September. Our CFO program should help mitigate the significant decline in base oil pricing as we seek to manage the spread in our re-refining business.

"The weakness in our Chemical and Industrial verticals will continue to present a near-term challenge for Technical Services, which is still recovering from the effects of the reduced activity in the energy market, a declining commodities environment and unfavorable currency translation. Oil and Gas Field Services and Lodging Services should see a seasonal uptick in profitability in the fourth quarter as the winter drilling programs get underway in Western Canada. Given the current state of oil and gas production, however, that increase will likely be somewhat muted, compared with prior years. Our plan to carve out Oil and Gas Field Services and Lodging Services as a standalone public entity remains on track, but completion of that IPO during 2016 remains dependent on market conditions and Board approval," McKim concluded.

Based on its year-to-date performance and current market conditions, Clean Harbors is revising its 2015 Adjusted EBITDA guidance range. The Company now expects Adjusted EBITDA in the range of $507 million to $514 million, compared with its previous guidance of $530 million to $570 million. A reconciliation of the Company's Adjusted EBITDA guidance to net income guidance is included below.

Non-GAAP Results

Clean Harbors reports Adjusted EBITDA results, which is a non-GAAP financial measure, as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP). The Company believes that Adjusted EBITDA provides additional useful information to investors since the Company's loan covenants are based upon levels of Adjusted EBITDA achieved. The Company defines Adjusted EBITDA in accordance with its existing credit agreement, as described in the following reconciliation showing the differences between reported net income and Adjusted EBITDA for the three and nine months ended September 30, 2015 and 2014 (in thousands):
  For the Three Months Ended:     For the Nine Months Ended:
September 30, 2015     September 30, 2014 September 30, 2015     September 30, 2014
 
Net income (loss) $40,228 $(93,337) $43,534 $(55,705)
Accretion of environmental liabilities 2,577 2,642 7,795 7,975
Depreciation and amortization 69,060 70,049 205,189 205,480
Goodwill impairment charge 123,414

 
31,992 123,414
Other expense (income) 139 (613) 390 (4,136)
Interest expense, net 19,017 19,494 57,704 58,430
Provision for income taxes 34,586 31,708 60,402 55,684
Adjusted EBITDA $165,607 $153,357 $407,006 $391,142

This press release includes a discussion of income from operations, net income and earnings per share amounts adjusted for the goodwill impairment charge identified in the reconciliations provided below. The Company believes that discussion of these additional non-GAAP measures provides investors with meaningful comparisons of current results to prior periods' results by excluding items that the Company does not believe reflect its fundamental business performance. The following shows the difference between income (loss) from operations to adjusted income from operations, net income (loss) to adjusted net income and earnings (loss) per share to adjusted earnings per share for the three and nine months ended September 30, 2015 and 2014 (in thousands, except per share amounts):
  For the Three Months Ended:     For the Nine Months Ended:
Adjusted income from operations September 30, 2015     September 30, 2014 September 30, 2015     September 30, 2014
 
Income (loss) from operations $ 93,970 $ (42,748) $ 162,030 $ 54,273
Goodwill impairment charge 123,414 31,992 123,414
Adjusted income from operations $ 93,970 $ 80,666 $ 194,022 $177,687

Adjusted net income
Net income (loss) $ 40,228 $(93,337) $ 43,534 $(55,705)
Goodwill impairment charge, net of tax 120,750 31,992 120,750
Adjusted net income $ 40,228 $ 27,413 $ 75,526 $ 65,045

Adjusted earnings per share
Earnings (loss) per share $ 0.69 $(1.55) $ 0.74 $(0.92)
Goodwill impairment charge, net of tax 2.00 0.54 1.99
Adjusted earnings per share $ 0.69 $ 0.45 $ 1.28 $ 1.07

Adjusted EBITDA Guidance Reconciliation

An itemized reconciliation between projected net income and projected Adjusted EBITDA is as follows:
   

For the Year Ending December 31, 2015
Amount
(In millions)
Projected GAAP net income $48     to     $57
Adjustments:
Accretion of environmental liabilities 11 to 10
Depreciation and amortization 274 to 270
Goodwill impairment charge 32 to 32
Interest expense, net 76 to 76
Provision for income taxes 66     to     69
Projected Adjusted EBITDA $507     to     $514

Conference Call Information

Clean Harbors will conduct a conference call for investors today at 9:00 a.m. (ET) to discuss the information contained in this press release. On the call, management will discuss Clean Harbors' financial results, business outlook and growth strategy.

Investors who wish to listen to the webcast and view the accompanying slides should visit the Investor Relations section of the Company's website at www.cleanharbors.com. The live call also can be accessed by dialing 201.689.8881 or 877.709.8155 prior to the start of the call. If you are unable to listen to the live call, the webcast will be archived on the Company's website.

About Clean Harbors

Clean Harbors (NYSE: CLH) is North America's leading provider of environmental, energy and industrial services. The Company serves a diverse customer base, including a majority of the Fortune 500, across the chemical, energy, manufacturing and additional markets, as well as numerous government agencies. These customers rely on Clean Harbors to deliver a broad range of services such as end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services. Through its Safety-Kleen subsidiary, Clean Harbors also is North America's largest re-refiner and recycler of used oil and a leading provider of parts washers and environmental services to commercial, industrial and automotive customers. Founded in 1980 and based in Massachusetts, Clean Harbors operates throughout the United States, Canada, Mexico and Puerto Rico. For more information, visit www.cleanharbors.com.

Safe Harbor Statement

Any statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans to," "estimates," "projects," or similar expressions. Such statements may include, but are not limited to, statements about future financial and operating results, the Company's planned carve-out and other statements that are not historical facts. Such statements are based upon the beliefs and expectations of Clean Harbors' management as of this date only and are subject to certain risks and uncertainties that could cause actual results to differ materially including, without limitation, those items identified as "risk factors" in Clean Harbors' most recently filed Form 10-K and Form 10-Q. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements. Clean Harbors undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements other than through its filings with the Securities and Exchange Commission, which may be viewed in the "Investors" section of Clean Harbors' website at www.cleanharbors.com.

CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share amounts)
     
For the Three Months Ended: For the Nine Months Ended:

September 30, 2015
   

September 30, 2014

September 30, 2015
   

September 30, 2014
 
Revenues $893,366 $851,465 $2,562,093 $2,556,612
Cost of revenues (exclusive of items shown separately below) 634,646 598,407 1,833,841 1,831,076
Selling, general and administrative expenses 93,113 99,701 321,246 334,394
Accretion of environmental liabilities 2,577 2,642 7,795 7,975
Depreciation and amortization 69,060 70,049 205,189 205,480
Goodwill impairment charge 123,414 31,992 123,414
Income (loss) from operations 93,970 (42,748) 162,030 54,273
Other (expense) income (139) 613 (390) 4,136
Interest expense, net (19,017) (19,494) (57,704) (58,430)
Income (loss) before provision for income taxes 74,814 (61,629) 103,936 (21)
Provision for income taxes 34,586 31,708 60,402 55,684
Net income (loss) $40,228 $(93,337) $43,534 $ (55,705)
Earnings (loss) per share:
Basic $0.69 $ (1.55) $0.74 $ (0.92)
Diluted $0.69 $ (1.55) $0.74 $ (0.92)
 
Shares used to compute earnings (loss) per share — Basic 58,161 60,369 58,799 60,585
Shares used to compute earnings (loss) per share — Diluted 58,268 60,369 58,898 60,585
CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
     
September 30, 2015 December 31, 2014
Current assets:
Cash and cash equivalents $ 179,191 $ 246,879
Accounts receivable, net 600,283 557,131
Unbilled accounts receivable 41,562 40,775
Deferred costs 19,096 19,018
Inventories and supplies 150,255 168,663
Prepaid expenses and other current assets 44,880 57,435
Deferred tax assets 37,288 36,532
Total current assets 1,072,555 1,126,433
Property, plant and equipment, net 1,531,548 1,558,834
Other assets:
Deferred financing costs 15,121 17,580
Goodwill 447,918 452,669
Permits and other intangibles, net 518,995 530,080
Other 13,724 18,682
Total other assets 995,758 1,019,011
Total assets $ 3,599,861 $ 3,704,278
Current liabilities:
Current portion of capital lease obligations $ 11 $ 536
Accounts payable 295,476 267,329
Deferred revenue 62,837 62,966
Accrued expenses 244,790 219,549
Current portion of closure, post-closure and remedial liabilities 21,902 22,091
Total current liabilities 625,016 572,471
Other liabilities:
Closure and post-closure liabilities, less current portion 47,861 45,702
Remedial liabilities, less current portion 126,816 138,029
Long-term obligations 1,395,000 1,395,000
Deferred taxes, unrecognized tax benefits and other long-term liabilities 282,447 290,205
Total other liabilities 1,852,124 1,868,936
Total stockholders' equity, net 1,122,721 1,262,871
Total liabilities and stockholders' equity $ 3,599,861 $ 3,704,278

Supplemental Segment Data (in thousands)
 
  For the Three Months Ended:
Revenue September 30, 2015     September 30, 2014

Third Party Revenues
 

Intersegment Revenues (Expense), net
 

Direct Revenues

Third Party Revenues
 

Intersegment Revenues (Expense), net
 

Direct Revenues
Technical Services $253,069   $ 35,325   $288,394 $ 272,478   $ 40,924   $313,402
Industrial and Field Services 307,226 (7,286) 299,940 163,582 (9,205) 154,377
Kleen Performance Products 100,827 (23,750) 77,077 140,345 (52,606) 87,739
SK Environmental Services 171,832 (5,945) 165,887 170,980 21,212 192,192
Lodging Services 13,507 773 14,280 36,582 723 37,305
Oil and Gas Field Services 46,788 1,194 47,982 67,370 639 68,009
Corporate Items 117   (311)   (194) 128   (1,687)   (1,559)
Total $893,366   $ —   $893,366 $ 851,465   $ —   $851,465
  For the Nine Months Ended:
Revenue September 30, 2015     September 30, 2014

Third Party Revenues
 

Intersegment Revenues (Expense), net
 

Direct Revenues

Third Party Revenues
 

Intersegment Revenues (Expense), net
 

Direct Revenues
Technical Services $741,419   $110,923   $852,342 $ 766,057   $ 119,617   $ 885,674
Industrial and Field Services 807,423 (25,400) 782,023 510,696 (31,819) 478,877
Kleen Performance Products 296,738 (63,437) 233,301 413,282 (155,588) 257,694
SK Environmental Services 508,392 (26,326) 482,066 503,692 64,418 568,110
Lodging Services 68,782 2,026 70,808 136,148 2,043 138,191
Oil and Gas Field Services 138,992 4,729 143,721 226,319 4,337 230,656
Corporate Items 347   (2,515)   (2,168) 418   (3,008)   (2,590)
Total $2,562,093   $ —   $2,562,093 $2,556,612  

$ —
  $2,556,612

Non-GAAP Segment Results

Clean Harbors reports Adjusted EBITDA results, which is a non-GAAP financial measure, as a complement to results provided in accordance with accounting principles generally accepted in the United States (GAAP) and believes that such information provides additional useful information to investors since the Company's loan covenants are based upon levels of Adjusted EBITDA achieved. The Company defines Adjusted EBITDA in accordance with its existing credit agreement. See "Non-GAAP Results" for a reconciliation of the Company's total Adjusted EBITDA to GAAP net income.
  For the Three Months Ended:     For the Nine Months Ended:
Adjusted EBITDA September 30, 2015     September 30, 2014 September 30, 2015     September 30, 2014
 
Technical Services $79,048 $86,928 $219,257 $233,402
Industrial and Field Services 62,460 20,303 145,850 67,391
Kleen Performance Products 12,123 21,473 23,471 49,252
SK Environmental Services 40,096 30,853 108,540 84,985
Lodging Services 1,827 15,972 12,589 49,196
Oil and Gas Field Services 1,579 9,545 800 27,688
Corporate Items (31,526) (31,717) (103,501) (120,772)
Total $165,607 $153,357 $407,006 $391,142

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