HCCI Presentation Q2 2012
Safe Harbor Statement All references to the “Company,” “we,” “our,” and “us” refer to Heritage -Crystal Clean, Inc., and its subsidiary. 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: the used oil re-refinery does not perform as anticipated; we are unable to generate sufficient funds to support our used oil re-refinery; we are unable to collect sufficient used oil to run our used oil re-refinery at full capacity; the used oil re-refinery may not generate the operating results that we anticipate; we do not realize the anticipated benefits from our acquisitions; our ability to comply with the extensive environmental, health and safety and employment laws and regulations that our Company is subject to; changes in environmental laws that affect our business model; competition; claims relating to our handling of hazardous substances; the limited demand for our used solvent; our dependency on key employees; our ability to effectively manage our extended network of branch locations; warranty expense and liability claims; personal injury litigation; dependency of suppliers; economic conditions including the recent recession and financial crisis, and downturns in the business cycles of automotive repair shops, industrial manufacturing business and small businesses in general; increased solvent, fuel and energy costs and volatility in the price of crude oil; 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 February 29, 2012 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. HCCI Presentation Q2 2012 1
HCCI Introduction 2
HCCI Strengths & Opportunities Demonstrated Strengths Numerous Growth Avenues Excellent Customer Service Same-Branch Sales Growth Integrated Sales & Service Approach Expanded Service Offerings Large Branch Network – 71 Branches Potential Expansion of Re-refining Capacity Efficient Rollout Model Geographic Expansion Large and Highly Diverse Customer Base Selectively Pursue Acquisition Opportunities Experienced Management Team Poised for Rapid Growth HCCI Presentation Q2 2012 3
HCCI Business Segments Environmental Services Oil Business Primary Services: parts cleaning, drummed waste, Includes collection of used oil from generators and vacuum services re-refining into lubricant base oil Provider of industrial and hazardous waste services Operator of 2 nd largest re-refinery in North America to small and mid-sized customers Integrated business from used oil collection to Focus on small industrial manufacturers (e.g., marketing and sale of re-refined base oil metal product fabricators and printers) and vehicle maintenance providers (e.g., car dealerships and Facility constructed for capital cost of automotive repair shops) approximately $1.00 per gallon of feedstock capacity Customers outsource the handling and disposal of parts cleaning solvents and containerized waste to Expanding fleet of used oil collection vehicles and HCCI; allows them to focus on their core business drivers, and broadening service area Parts Cleaning Services: Re-Refinery will leverage collection business, 2nd largest provider in the U.S. expected to drive revenue growth with improved margins Reduce the volume of hazardous waste generated and associated regulatory burden for its customers Based on March 2012 pricing Company est. the Provide strong recurring revenue business with facility will produce ~$130MM in revenue & substantial majority of revenues under ~$30MM in operating income annually automatically renewing service contracts Complementary to Environmental Services segment; leverages branch infrastructure HCCI Presentation Q2 2012 4
Service Offerings Parts Cleaning Drum Management Solvent-based Waste identification Aqueous-based Pickup and Other disposal All branches All branches Oil Recovery Vacuum Services Used oil, antifreeze Liquids containing and oily water sediment or sludge removal 95% of branches 55% of branches HCCI Presentation Q2 2012 5
Highly Experienced Management Team Years of Years of Years at Name Position/Experience Industry Used Oil Company Experience Experience President, CEO and Director, Founder of Heritage-Crystal Clean Joseph Chalhoub 13 30+ 30+ Former President of Safety-Kleen Chief Operating Officer Greg Ray 13 20+ 20+ Former Heritage-Crystal Clean CFO Formerly VP of Business Management at Safety-Kleen Chief Financial Officer Mark DeVita 12 17+ 10+ Former Vice President of Business Management Senior VP of Sales and Marketing John Lucks 12 30+ 13+ Served as the VP of Industrial Marketing and Business Management at Safety-Kleen VP of Operations Tom Hillstrom 10 25+ 20+ Formerly responsible for the Management of Several Recycling Plants and Strategic Planning and Acquisitions at Safety-Kleen VP of Oil and VP of Sales Ellie Chaves 6 18+ 16+ HCCI Presentation Q2 2012 6
Strong Track Record of Growth ($ in millions) Sales $152.9 $160.0 $112.1 $120.0 $108.1 $98.4 $89.7 $73.7 $80.0 $62.3 $32.0 $40.0 $0.0 2006 2007 2008 2009 2010 2011 Q2 2011 Q2 2012 Adjusted Net Income (1,2) $4.5 $5.0 $4.3 $3.3 $2.5 $2.5 $1.8 $1.5 $1.2 $0.7 $0.0 2006 2007 2008 2009 2010 2011 Q2 2011 Q2 2012 (1) 2007 figures exclude inventory impairment charge, independent investigation charge and gain on contract termination of $2.2 million, $0.9 million and $3.0 million, respectively. 2008 figures exclude inventory impairment charge and non-cash stock based compensation issued at IPO of $2.8 million and $3.2 million, respectively. (2) Assumes Company was a C-Corporation in all periods represented. 2008 figure reflects add backs of the $2.2 million one-time charge related to the reorganization from LLC to C-Corporation and $372 thousand charge on preferred and mandatorily redeemable capital units. 2008 adjustments tax adjusted at 40%. HCCI Presentation Q2 2012 7
Investment Highlights $6.0 billion market opportunity Well Positioned in Significant market position - #2 in parts cleaning service and #2 in re-refining Large, Growing Focused on underserved small and mid-sized business market Market Proven team, deep bench strength Highly Management possesses deep knowledge of the oil re-refining industry Experienced Executive team comprised of same individuals who played a major role in building Safety- Management Team Kleen into a $2.0 billion market cap company prior to its sale to Laidlaw in 1998 Non-hazardous and product reuse programs reduce regulatory burden on customers and provide cost savings Superior Value Differentiated customer service focus creates long-term client relationships Proposition Expanded used oil collection efforts to support re-refinery operations Large used oil industry re-refining opportunity – 945 million gallons per year (only 29% re-refined) Further growth from existing branches (market penetration, products and services) Multiple Avenues Geographic expansion; still expanding in the northeastern, southeastern and western U.S. for Growth New product and service extensions Recurring revenue model; substantial majority of hazardous material services revenues under automatically renewing service contracts Compelling Historical revenue growth rates in excess of 15% (2000-2011) Financial Model Improving route density and overhead leverage drive earnings growth Re-refinery operations are expected to substantially improve profitability HCCI Presentation Q2 2012 8
Industry 9
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