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Clean Harbors, Inc. (CLH - Snapshot Report) reported third-quarter fiscal 2012 earnings of 54 cents per share, missing the Zacks Consensus Estimate of 55 cents as well as the year-ago quarter’s earnings of 70 cents.

Adjusted earnings in the reported quarter excluded a pre-tax charge related to the company’s senior debt refinancing. Including the expense, earnings were 23 cents per share compared to 70 cents in the year-ago quarter.

Total revenues declined 4% to $533.8 million from $556.1 million in the year-ago quarter. Revenues lagged behind the Zacks Consensus Estimate of $550 million.

Cost and Margins

Cost of revenues dropped 3.5% to $372.9 million in the quarter. Gross profit fell 5% to $160.9 million. Consequently, gross margin went down 40 basis-points (bps) to 30.1%.

Selling, general and administrative expenses decreased 8.2% to $60.3 million. Operating income dipped 15% to $56.7 million. Consequently, operating margin contracted 140 bps to 10.6% in the quarter.

Financial Updates

Cash and cash equivalents were $523.6 million as of September 30, 2012, compared with $260.7 million as of December 31, 2011. Long-term debt amounted to $800 million as of September 30, 2012, compared with $524.2 million as of December 31, 2011.


For 2012 the company revised its revenue guidance in the range of $2.15-$2.16 billion, down from the band of $2.20-$2.25 billion. Further, it revised EBITDA estimates downwards to lie within $375-$380 million from the previous range of $400-$410 million.

For 2013, the company envisioned revenues to remain in the band of $2.30-$2.35 billion. EBITDA is expected to vary within $425-$435 million. 

Our View

Clean Harbors is set to acquire Safety-Kleen, Inc. the largest re-refiner and recycler of used oil in North America and a leading provider of parts cleaning and environmental services. The transaction of $1.25 billion is the largest in the company’s history and is expected to close by 2012. The acquisition will increase its debt liability and also raise its interest expense

Clean Harbors retains a short-term Zacks #5 Rank (Strong Sell). The company is the leading provider of environmental, energy and industrial services throughout North America. It serves more than 60,000 customers, thousands of smaller private entities and numerous federal, state, provincial and local governmental agencies.


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