“Our second-quarter results demonstrate the resiliency of our business model and our organization’s ability to effectively respond to a crisis,” President and CFO Alan S. McKim says. “The COVID-19 pandemic forced shutdowns across North America, which began to impact many of our markets and customers. In response, we enacted a comprehensive series of actions, including developing safety protocols to protect our workforce, rapidly reducing costs, lowering our capital spending, partially shutting down work locations, temporarily closing nearly half our re-refinery capacity and launching a comprehensive COVID-19 emergency response service offering.”

Q2 results:

Revenues were $710.0 million compared with $868.7 million in the same period of 2019. Income from operations was $60.2 million compared with $73.0 million in the second quarter of 2019.

Net income was $29.0 million, or $0.52 per diluted share. This compares with net income of $36.2 million, or $0.65 per diluted share, for the same period in 2019. Adjusted for certain items in both periods, adjusted net income was $28.9 million, or $0.52 per diluted share, for the second quarter of 2020, compared with adjusted net income of $36.9 million, or $0.66 per diluted share, in the same period of 2019. (See reconciliation table below)

Adjusted EBITDA (see description below) was $135.5 million compared with $149.8 million in the same period of 2019.

Q2 review:

“While overall profitability for the company was lower compared with a year ago, our Environmental Services segment achieved a 17% increase in Adjusted EBITDA, driven in part by our disposal facilities and decontamination work,” McKim says. “Incineration utilization was a robust 87 percent as we continued to capture high-value waste streams across our network and capitalized on the strong backlog we had entering the quarter. Landfill volumes were down 24 percent due to the COVID-19 related deferral of some remediation and waste projects, but our base business remained stable. Field Services revenue grew nearly 50 percent from a year ago as we generated $50 million in pandemic-related work in the quarter. We have now completed more than 7,000 COVID-19 responses. Certain portions of our Environmental Services segment, including Industrial Services and other lines of business, such as household hazardous waste and lab pack, were negatively impacted as a result of the virus outbreak.

“The pandemic also adversely impacted our Safety-Kleen segment as shelter-in-place restrictions imposed early in the quarter substantially lowered vehicle miles driven across much of the U.S. This resulted in a reduction in near-term demand for core offerings in our Safety-Kleen branch network as well as for base oil and finished lubricants in our Safety-Kleen Oil business,” McKim says. “Safety-Kleen revenue was down 30 percent from a year ago with Adjusted EBITDA declining 41 percent. Aggressive cost actions enabled us to partly offset lower revenue in this segment. We also significantly raised our charge-for-oil (CFO) rates for used motor oil (UMO) as crude oil prices crashed and demand for our re-refined lube oil products and other outlets for waste oil shuttered.”

Business outlook:

“As we enter the second half of 2020, we believe we have positioned ourselves well for the current economic environment,” McKim says. “Within multiple parts of our business, we have seen a measurable recovery from the lows we experienced in April as both the U.S. and Canadian economies reopened in subsequent months. While localized outbreaks have threatened to stall the progress in certain states or regions, we believe that the prudent cost actions we have taken should enable us to weather virus-related slowdowns. In addition, our emergency response business is partially offsetting lost revenue in other parts of our business. We will continue to pursue opportunities for disinfection, decontamination and disposal with impacted customers going forward."

“Within Environmental Services, our recycling and disposal network continues to see a steady flow of waste volumes, with no meaningful decline from most of our large-quantity generators. We are experiencing project delays due to the virus, and some Chemical customers have recently slowed production. While that may limit our high-margin volumes in the short-term, other parts of this segment, including Industrial Services and Technical Services, are expected to ramp up in the second half of this year. Field Services is on track for a strong 2020, with anticipated COVID-related revenue of approximately $100 million for the full year."

“Within Safety-Kleen, we began the third quarter on a positive trajectory, but still remain below prior year levels. The branch business continues to improve as summer-related driving increases demand for our services. We are monitoring the impact of new shelter-in-place mandates, but the recent rise in COVID cases so far has not derailed our recovery in the Safety-Kleen branch business. For Safety-Kleen Oil, we have seen base oil and lubricant demand rebound and we restarted production in July at two of the four re-refineries that we had temporarily closed. We will continue to actively manage our CFO rates to reflect the value of the waste oil and the collection services we are providing," McKim says.

Based on its year-to-date financial performance and current market conditions, for 2020 Clean Harbors expects:

• Adjusted EBITDA in the range of $470 million to $500 million, based on anticipated 2020 GAAP net income in the range of $53 million to $84 million; and
• Adjusted free cash flow in the range of $200 million to $230 million, based on anticipated 2020 net cash from operating activities in the range of $355 million to $405 million.