Clean Harbors(US:CLH)2021-08-03 16:00PART I: FINANCIAL INFORMATION Unaudited Financial Statements Unaudited financial statements for Q2 2021 reflect strong revenue and net income growth, with total assets at $4.28 billion, following a Q1 segment reorganization - In Q1 2021, the company reorganized its business into two new reportable segments: Environmental Services and Safety-Kleen Sustainability Solutions, with historical data recast242592 Consolidated Balance Sheets As of June 30, 2021, total assets increased to $4.28 billion, driven by higher cash and receivables, while total stockholders' equity rose to $1.41 billion Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,677,316 | $1,525,722 | | Total Assets | $4,275,879 | $4,131,520 | | Total Current Liabilities | $711,069 | $636,145 | | Total Liabilities | $2,866,292 | $2,789,969 | | Total Stockholders' Equity | $1,409,587 | $1,341,551 | Consolidated Statements of Operations Q2 2021 total revenues increased 30.5% to $926.5 million, driving net income to more than double to $67.1 million or $1.22 per diluted share Q2 2021 vs Q2 2020 Performance (in thousands, except per share) | Metric | Q2 2021 | Q2 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $926,458 | $710,000 | +30.5% | | Income from Operations | $110,001 | $60,220 | +82.7% | | Net Income | $67,075 | $29,023 | +131.1% | | Diluted EPS | $1.22 | $0.52 | +134.6% | Six Months 2021 vs 2020 Performance (in thousands, except per share) | Metric | Six Months 2021 | Six Months 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,734,606 | $1,568,563 | +10.6% | | Income from Operations | $160,856 | $105,716 | +52.2% | | Net Income | $88,811 | $40,595 | +118.8% | | Diluted EPS | $1.62 | $0.73 | +121.9% | Consolidated Statements of Cash Flows Net cash from operating activities for the six months ended June 30, 2021, significantly increased to $265.4 million, driven by higher net income and improved working capital Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $265,432 | $173,486 | | Net cash used in investing activities | ($132,340) | ($141,685) | | Net cash (used in) from financing activities | ($60,534) | $47,017 | | Increase in cash and cash equivalents | $76,473 | $75,375 | Notes to Financial Statements Notes detail accounting policies, Q1 segment reorganization, Q2 revenue disaggregation, the proposed $1.25 billion HydroChemPSC acquisition, and legal reserves - On August 3, 2021, the company agreed to acquire HydroChemPSC (HPC) for $1.25 billion in cash, with the acquisition expected to close later in 20214445117 - On June 29, 2021, the company agreed to acquire used motor oil collection and re-refinery assets from Vertex Energy, Inc. for $140.0 million, expanding the Safety-Kleen Sustainability Solutions segment43 Q2 2021 Revenue by New Segment (in thousands) | Segment | Revenue | | :--- | :--- | | Environmental Services | $723,147 | | Safety-Kleen Sustainability Solutions | $203,232 | | Corporate | $79 | | Total | $926,458 | Adjusted EBITDA by Segment (in thousands) | Segment | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Environmental Services | $176,041 | $176,241 | | Safety-Kleen Sustainability Solutions | $63,314 | $8,431 | | Corporate Items | ($51,584) | ($46,406) | | Total | $187,771 | $138,266 | Management's Discussion and Analysis (MD&A) MD&A highlights strong Q2 2021 performance driven by COVID-19 recovery, with total revenues up 30.5% and Adjusted EBITDA up 35.8%, supported by strategic acquisitions and strong liquidity - Q2 2021 performance reflects a significant recovery from the COVID-19 pandemic, with direct revenues and Adjusted EBITDA for both segments at or above pre-pandemic levels108111 - The $1.25 billion HydroChemPSC (HPC) acquisition will be financed with cash on hand and long-term debt, supported by a $1.0 billion term loan commitment45119163 - Adjusted Free Cash Flow for the first six months of 2021 was $176.9 million, a substantial increase from $71.9 million in 2020, due to higher operating income and improved working capital110159 - Anticipated 2021 capital spending is between $190.0 million and $210.0 million, including permitting for a new incinerator in Kimball, Nebraska, expected by early 2025166 Segment Performance Q2 2021 Environmental Services revenue grew 18.2% to $724.1 million, while Safety-Kleen Sustainability Solutions revenue soared 107.8% to $202.3 million with 651% Adjusted EBITDA growth Q2 2021 vs Q2 2020 Direct Revenue by Segment (in thousands) | Segment | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Environmental Services | $724,097 | $612,594 | +18.2% | | Safety-Kleen Sustainability Solutions | $202,282 | $97,350 | +107.8% | Q2 2021 vs Q2 2020 Adjusted EBITDA by Segment (in thousands) | Segment | Q2 2021 | Q2 2020 | % Change | | :--- | :--- | :--- | :--- | | Environmental Services | $176,041 | $176,241 | -0.1% | | Safety-Kleen Sustainability Solutions | $63,314 | $8,431 | +651.0% | Liquidity and Capital Resources Strong liquidity maintained with $666.3 million in cash and marketable securities, $265.4 million in operating cash flow, and $287.3 million available on its revolving credit facility - As of June 30, 2021, total liquidity was approximately $953.6 million, comprising $666.3 million in cash and marketable securities and $287.3 million available on its revolving credit facility160 - The company repurchased 0.5 million shares for $45.4 million in the first six months of 2021, with $164.4 million remaining authorized for future repurchases164 Quantitative and Qualitative Disclosures About Market Risk No material changes were reported in market risk exposures during the first six months of 2021 compared to the 2020 Annual Report - There were no material changes to market risk disclosures in the first six months of 2021171 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2021172 - No material changes occurred in internal control over financial reporting during the quarter173 PART II: OTHER INFORMATION Legal Proceedings This section incorporates by reference legal proceedings detailed in Note 16, including matters related to the Ville Mercier facility and Superfund site liabilities - The company refers to Note 16, "Commitments and Contingencies," for details on legal proceedings177 Risk Factors A new risk factor addresses the proposed HydroChemPSC (HPC) acquisition, noting potential adverse effects from failure to close, including a $50 million termination fee - A new risk factor addresses the proposed HydroChemPSC (HPC) acquisition, noting that completion is subject to regulatory approval and failure to close could have adverse effects178179 - Potential negative outcomes of a failed or delayed HPC acquisition include a $50 million termination fee, asset divestitures, and significant legal and advisory costs180 Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2021, the company repurchased 200,000 common shares for approximately $18.9 million, with $164.4 million remaining available under the repurchase program Common Stock Repurchases in Q2 2021 | Period | Total Shares Purchased | Avg. Price Paid per Share | Shares Purchased (Plan) | Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Apr 2021 | 6,951 | $86.15 | — | $183,306 | | May 2021 | 242 | $88.96 | — | $183,306 | | Jun 2021 | 204,243 | $94.32 | 200,000 | $164,442 | | Total Q2 | 211,436 | $94.04 | 200,000 | $164,442 | Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None187 Mine Safety Disclosures This item is not applicable to the company - Not applicable187 Other Information No other information was reported for this item - None187 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Interactive Data Files (iXBRL)