Clean Harbors, Inc. 1999 Annual Report (10-K) Summary
Business Context and Reporting Period
Company: Clean Harbors, Inc.
Reporting Period: Fiscal year ended December 31, 1999.
Industry: Hazardous waste management services (treatment, disposal, site services, transportation, and consulting).
Operations: Operates in one segment across 27 states and Puerto Rico with 12 waste management facilities and 33 service centers. The company serves a diversified base including chemical, pharmaceutical, utility, and industrial firms.
Key Financial Metrics (Year Ended Dec 31, 1999)
| Metric | 1999 Value | 1998 Value |
|---|---|---|
| Revenues | $202,965,000 | $197,439,000 |
| Net Loss | $(2,244,000) | $(3,854,000) |
| Loss Per Share (Basic/Diluted) | $(0.25) | $(0.42) |
| EBITDA | $16,138,000 | $15,249,000 |
| Operating Cash Flow | $6,106,000 | $3,896,000 |
| Working Capital | $14,565,000 | $11,245,000 |
| Total Assets | $145,247,000 | $145,910,000 |
| Long-Term Debt | $72,683,000 | $68,774,000 |
| Stockholders' Equity | $34,171,000 | $36,310,000 |
Profitability: The company reported a net loss for the third consecutive year, though the loss narrowed significantly compared to 1998. Operating income was $6,637,000, but interest expense of $8,599,000 contributed to the pre-tax loss.
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 2.8% to $202.97 million, driven by a 6.7% increase in site services and growth in industrial maintenance and consulting. This offset an 8.1% decrease in the volume of waste processed, as the company raised prices on unprofitable waste streams.
- Cost Management: Cost of revenues increased to $149.64 million. Disposal costs paid to third parties decreased as a percentage of revenue (12.5% vs 14.3% in 1998) due to lower waste volumes and strategic pricing.
- Acquisitions: Acquired the Texas Transportation and Brokerage Divisions of American Ecology Environmental Services for $1.9 million in May 1999.
- Debt Structure: Interest expense decreased to $8.60 million from $9.63 million, aided by a $439,000 interest credit on an income tax refund and lower average loan balances.
Outlook, Risks, and Contingencies
Guidance and Outlook: Management anticipates 2000 capital additions of approximately $4 million (excluding a $3 million vehicle purchase). The company expects to meet debt covenants for the foreseeable future but noted recent waivers for borrowing availability covenants in early 2000.
Key Risks and Contingencies:
- Debt Maturity: $50 million in Senior Notes mature in May 2001. Refinancing is required, contingent on improved operating results and favorable interest rates.
- Environmental Liabilities: Named as a Potentially Responsible Party (PRP) at 27 Superfund sites. Accrued costs were $285,000 at year-end. The company relies on indemnities from prior owners (ChemWaste, Southdown) for many sites.
- Regulatory Compliance: Subject to strict RCRA regulations. An EPA inquiry regarding late delivery of railcars to the Kimball incinerator is ongoing; the company believes there was no wrongdoing but penalties remain a risk.
- Legal Proceedings: A 1995 employee fatality at the Cincinnati facility led to a Justice Department inquiry regarding potential RCRA permit violations. The company disputes the allegations.
- Tax Dispute: A state tax assessment of approximately $3 million is under administrative appeal.
Investor Verification Checklist
- Debt Refinancing: Verify the company's ability to refinance the $50 million Senior Notes maturing in May 2001 given the history of net losses.
- Covenant Compliance: Monitor the status of the borrowing availability covenant waiver and the company's ability to maintain the $4.5 million availability requirement.
- Superfund Exposure: Review the adequacy of indemnities from ChemWaste and Southdown regarding the 27 Superfund sites and the potential for joint and several liability.
- Regulatory Inquiries: Track the outcome of the EPA inquiry regarding railcar delays and the Justice Department investigation into the 1995 Cincinnati accident.
- State Tax Appeal: Confirm the status of the $3 million state income tax assessment appeal.