UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 16, 2014
Heritage-Crystal Clean, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE | 001-33987 | 26-0351454 |
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
2175 Point Boulevard, Suite 375, Elgin, IL | 60123 |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (847) 836-5670
________________________________________________________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition.
On October 16, 2014 the Registrant issued a press release, a copy of which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit 99.1. Press release dated October 16, 2014
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Heritage-Crystal Clean, Inc.
(Registrant) |
||
October 16, 2014
(Date) |
/s/ MARK DEVITA
Mark DeVita Chief Financial Officer |
Exhibit Index | ||
99.1 | Press release dated October 16, 2014 |
EXHIBIT 99.1
ELGIN, Ill., Oct. 16, 2014 (GLOBE NEWSWIRE) -- Heritage-Crystal Clean, Inc. (Nasdaq:HCCI), a leading provider of parts cleaning, used oil re-refining, and hazardous and non-hazardous waste services primarily focused on small and mid-sized customers, today announced results for the third quarter of fiscal 2014, which ended September 6, 2014.
Third quarter and year to date highlights include:
The Company's Founder, President, and Chief Executive Officer, Joe Chalhoub, commented, "We are pleased with our execution during the third quarter. In our Environmental Services segment, overall revenue growth was strong at 14.0%, and same branch sales continued to grow at double digit rates. We opened one additional branch during the quarter bringing our total number of branches to 77. Our continued expansion will help us achieve our long-term growth objectives."
Chalhoub added, "Our Oil Business segment also experienced robust revenue growth driven by increased throughput at our re-refinery, compared to the year ago quarter, as a result of operating the plant at approximately 100% of our 65 million gallon nameplate capacity. During the quarter we also saw progress in the efficiency of our used oil collection fleet, and we were able to continue our success in reducing the weighted average price paid to generators for their used oil."
Mark DeVita, Chief Financial Officer also commented, "The revenue growth in the Environmental Services segment allowed us to further leverage our fixed costs and helped us achieve a strong operating margin of 28.6% compared to 23.8% in the third quarter of 2013. Our improvement in third quarter operating margin helped us raise the operating margin for the first three quarters of fiscal 2014 to 26.6%. We are pleased with this result given the negative impact severe weather had on our first quarter operating margin."
DeVita added, "During the quarter we were able to improve the operating margin in our Oil Business segment compared to the second quarter of this year, even as the market price for the type of base oil we sell declined compared to the second quarter of this year. Our margin improvement was driven by improved leverage in our used oil collection network, a lower average price paid to generators for their used oil, and operation of re-refinery at capacity."
DeVita also added, "SG&A expense for the first three quarters of 2014 was 11.4% of revenue, compared to 10.8% in the first three quarters of fiscal 2013. The majority of the increase was due to higher acquisition costs, which were $2.2 million higher than the same period in fiscal 2013."
Safe Harbor Statement
All 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," "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: volatility in the price of base oil; increased solvent, fuel, and energy costs and volatility in the price of crude oil; increased market supply or decreased demand for base oil; the used oil re-refinery does not perform as anticipated; the used oil re-refinery may not generate the operating results that we anticipate; changes in environmental laws that affect our business model; our ability to comply with the extensive environmental, health and safety, and employment laws and regulations that our Company is subject to; competition; economic conditions including conditions like those experienced in the recent recession and financial crisis and downturns in the business cycles of automotive repair shops, industrial manufacturing business, and small businesses in general; dependency on suppliers; our dependency on key employees; we do not realize the anticipated benefits from our acquisitions; claims relating to our handling of hazardous substances; the limited demand for our used solvent; our ability to effectively manage our extended network of branch locations; warranty expense and liability claims; personal injury litigation; 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 3, 2014 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, 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 77 branches serving over 98,000 customer locations.
Conference Call
The Company will host a conference call on Friday October 17, 2014 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://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) | ||
September 6, 2014 |
December 28, 2013 |
|
ASSETS | ||
Current Assets: | ||
Cash and cash equivalents | $ 15,890 | $ 22,632 |
Accounts receivable - net | 36,272 | 31,172 |
Inventory - net | 30,160 | 27,307 |
Deferred income taxes | 1,318 | 1,004 |
Other current assets | 5,587 | 3,661 |
Total Current Assets | 89,227 | 85,776 |
Property, plant and equipment - net | 90,294 | 85,039 |
Equipment at customers - net | 20,979 | 19,358 |
Software and intangible assets - net | 15,508 | 16,094 |
Goodwill | 9,798 | 9,691 |
Total Assets | $ 225,806 | $ 215,958 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Current Liabilities: | ||
Accounts payable | $ 23,778 | $ 18,291 |
Current maturities of long-term debt and term loan | 2,420 | 2,906 |
Accrued salaries, wages, and benefits | 3,641 | 4,145 |
Taxes payable | 1,923 | 1,292 |
Other accrued expenses | 2,638 | 2,730 |
Total Current Liabilities | 34,400 | 29,364 |
Term loan, less current maturities | 16,750 | 17,500 |
Long-term debt, less current maturities | 147 | 552 |
Deferred income taxes | 11,296 | 9,238 |
Total Liabilities | $ 62,593 | $ 56,654 |
STOCKHOLDERS' EQUITY: | ||
Common stock - 26,000,000 shares authorized at $0.01 par value, 18,447,586 and 18,360,282 shares issued and outstanding at September 6, 2014 and December 28, 2013, respectively | $ 184 | $ 184 |
Additional paid-in capital | 147,348 | 146,043 |
Retained earnings | 14,824 | 12,143 |
Total Heritage-Crystal Clean, Inc. Stockholders' Equity | 162,356 | 158,370 |
Noncontrolling interest | 857 | 934 |
Total Equity | $ 163,213 | $ 159,304 |
Total Liabilities and Stockholders' Equity | $ 225,806 | $ 215,958 |
Heritage-Crystal Clean, Inc. | ||||
Consolidated Statements of Operations | ||||
(In Thousands, Except per Share Amounts) | ||||
(Unaudited) | ||||
Third Quarter Ended, | First Three Quarters Ended, | |||
September 6, 2014 |
September 7, 2013 |
September 6, 2014 |
September 7, 2013 |
|
Revenues | ||||
Product revenues | $ 38,532 | $ 32,302 | $ 106,449 | $ 87,766 |
Service revenues | 39,384 | 35,301 | 115,513 | 103,394 |
Total revenues | $ 77,916 | $ 67,603 | $ 221,962 | $ 191,160 |
Operating expenses | ||||
Operating costs | $ 62,588 | $ 55,698 | $ 183,478 | $ 160,185 |
Selling, general, and administrative expenses | 8,183 | 7,051 | 25,332 | 20,691 |
Depreciation and amortization | 2,593 | 2,224 | 7,911 | 6,246 |
Other expense - net | 172 | 138 | 357 | 231 |
Operating income | 4,380 | 2,492 | 4,884 | 3,807 |
Interest expense – net | 24 | 97 | 110 | 310 |
Income before income taxes | 4,356 | 2,395 | 4,774 | 3,497 |
Provision for income taxes | 1,942 | 1,061 | 2,011 | 1,526 |
Net income | 2,414 | 1,334 | 2,763 | 1,971 |
Income attributable to noncontrolling interest | 3 | 26 | 82 | 72 |
Net income attributable to Heritage-Crystal Clean, Inc. common stockholders | $ 2,411 | $ 1,308 | $ 2,681 | $ 1,899 |
Net income per share: basic | $ 0.13 | $ 0.07 | $ 0.15 | $ 0.10 |
Net income per share: diluted | $ 0.13 | $ 0.07 | $ 0.14 | $ 0.10 |
Number of weighted average shares outstanding: basic | 18,446 | 18,272 | 18,423 | 18,174 |
Number of weighted average shares outstanding: diluted | 18,810 | 18,585 | 18,762 | 18,494 |
Heritage-Crystal Clean, Inc. | ||||
Segment Information | ||||
(In Thousands) | ||||
(Unaudited) | ||||
Third Quarter Ended, | ||||
September 6, 2014 | ||||
Environmental Services |
Oil Business |
Corporate and Eliminations |
Consolidated | |
Revenues | ||||
Product revenues | $ 4,270 | $ 34,262 | $ — | $ 38,532 |
Service revenues | 37,535 | 1,849 | 39,384 | |
Total revenues | $ 41,805 | $ 36,111 | $ — | $ 77,916 |
Operating expenses | ||||
Operating costs | 28,645 | 33,943 | — | 62,588 |
Operating depreciation and amortization | 1,208 | 893 | — | 2,101 |
Profit before corporate selling, general, and administrative expenses | $ 11,952 | $ 1,275 | $ — | $ 13,227 |
Selling, general, and administrative expenses | 8,183 | 8,183 | ||
Depreciation and amortization from SG&A | 492 | 492 | ||
Total selling, general, and administrative expenses | $ 8,675 | $ 8,675 | ||
Other expense - net | 172 | 172 | ||
Operating income | 4,380 | |||
Interest expense – net | 24 | 24 | ||
Income before income taxes | $ 4,356 |
Third Quarter Ended, | ||||
September 7, 2013 | ||||
Environmental Services |
Oil Business |
Corporate and Eliminations |
Consolidated | |
Revenues | ||||
Product revenues | $ 3,498 | $ 28,804 | $ — | $ 32,302 |
Service revenues | 33,176 | 2,125 | 35,301 | |
Total revenues | $ 36,674 | $ 30,929 | $ — | $ 67,603 |
Operating expenses | ||||
Operating costs | 26,790 | 28,908 | — | 55,698 |
Operating depreciation and amortization | 1,160 | 790 | — | 1,950 |
Profit before corporate selling, general, and administrative expenses | $ 8,724 | $ 1,231 | $ — | $ 9,955 |
Selling, general, and administrative expenses | 7,051 | 7,051 | ||
Depreciation and amortization from SG&A | 274 | 274 | ||
Total selling, general, and administrative expenses | $ 7,325 | $ 7,325 | ||
Other expense - net | 138 | 138 | ||
Operating income | 2,492 | |||
Interest expense – net | 97 | 97 | ||
Income before income taxes | $ 2,395 | |||
First Three Quarters Ended, | ||||
September 6, 2014 | ||||
Environmental Services |
Oil Business |
Corporate and Eliminations |
Consolidated | |
Revenues | ||||
Product revenues | $ 12,915 | $ 93,534 | $ — | $ 106,449 |
Service revenues | 109,449 | 6,064 | 115,513 | |
Total revenues | $ 122,364 | $ 99,598 | $ — | $ 221,962 |
Operating expenses | ||||
Operating costs | 86,104 | 97,374 | — | 183,478 |
Operating depreciation and amortization | 3,713 | 2,696 | — | 6,409 |
Profit (loss) before corporate selling, general, and administrative expenses | $ 32,547 | $ (472) | $ — | $ 32,075 |
Selling, general, and administrative expenses | 25,332 | 25,332 | ||
Depreciation and amortization from SG&A | 1,502 | 1,502 | ||
Total selling, general, and administrative expenses | $ 26,834 | $ 26,834 | ||
Other expense - net | 357 | 357 | ||
Operating income | 4,884 | |||
Interest expense – net | 110 | 110 | ||
Income before income taxes | $ 4,774 |
First Three Quarters Ended, | ||||
September 7, 2013 | ||||
Environmental Services |
Oil Business |
Corporate and Eliminations |
Consolidated | |
Revenues | ||||
Product revenues | $ 9,020 | $ 78,746 | $ — | $ 87,766 |
Service revenues | 98,278 | 5,116 | 103,394 | |
Total revenues | $ 107,298 | $ 83,862 | $ — | $ 191,160 |
Operating expenses | ||||
Operating costs | 77,129 | 83,056 | — | 160,185 |
Operating depreciation and amortization | 3,320 | 2,228 | — | 5,548 |
Profit (loss) before corporate selling, general, and administrative expenses | $ 26,849 | $ (1,422) | $ — | $ 25,427 |
Selling, general, and administrative expenses | 20,691 | 20,691 | ||
Depreciation and amortization from SG&A | 698 | 698 | ||
Total selling, general, and administrative expenses | $ 21,389 | $ 21,389 | ||
Other expense - net | 231 | 231 | ||
Operating income | 3,807 | |||
Interest expense – net | 310 | 310 | ||
Income before income taxes | $ 3,497 |
Total assets by segment as of September 6, 2014 and December 28, 2013 were as follows (in thousands):
September 6, 2014 | December 28, 2013 | |
Total Assets: | ||
Environmental Services | $ 78,312 | $ 80,451 |
Oil Business | 121,837 | 110,040 |
Unallocated Corporate Assets | 25,657 | 25,467 |
Total | $ 225,806 | $ 215,958 |
Segment assets for the Environmental Services and Oil Business segments consist of property, plant, and equipment, intangible assets, goodwill, accounts receivable, and inventories allocated to each segment. Assets for the Corporate unallocated amounts consist of property, plant, and equipment used at the Corporate headquarters, as well as cash and net deferred tax assets.
Heritage-Crystal Clean, Inc. | |||||
Reconciliation of Net Income Determined in Accordance with U.S. GAAP to Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) | |||||
(In Thousands) | |||||
(Unaudited) | |||||
Third Quarter Ended, | First Three Quarters Ended, | ||||
September 6, 2014 |
September 7, 2013 |
September 6, 2014 |
September 7, 2013 |
||
Net income | $ 2,414 | $ 1,334 | $ 2,763 | $ 1,971 | |
Interest expense - net | 24 | 97 | 110 | 310 | |
Provision for income taxes | 1,942 | 1,061 | 2,011 | 1,526 | |
Depreciation and amortization | 2,593 | 2,224 | 7,911 | 6,246 | |
EBITDA(*) | $ 6,973 | $ 4,716 | $ 12,795 | $ 10,053 | |
* 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. |
CONTACT: Mark DeVita, Chief Financial Officer, at (847) 836-5670