HCCI Acquisition of FCC Environmental, LLC October 17, HCCI April 2012 Roadshow Presentation

Transcription

1 HCCI Acquisition of FCC Environmental, LLC October 17, 2014 HCCI April 2012 Roadshow Presentation

2 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," growth strategies, "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; the ability to complete acquisitions; the ability to pay off indebtedness; 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. 1

3 Management Presenters Joe Chalhoub Founder, President, and Chief Executive Officer Gregory Ray Chief Operating Officer Mark DeVita Chief Financial Officer 2

4 HCCI Strengths & Opportunities Demonstrated Strengths Excellent Customer Service Integrated Sales & Service Approach Large Branch Network 77 Branches Efficient Rollout Model Large and Highly Diverse Customer Base Experienced Management Team Numerous Growth Avenues Same-Branch Sales Growth Expanded Service Offerings Expansion of Re-Refining Capacity Geographic Expansion Selectively Pursue Acquisition Opportunities Poised for Continued Growth 3

5 HCCI Historic Revenue Growth ($ in millions) Oil Business ( ) - CAGR 73% Environmental Service ( ) - CAGR 12% $350 $318.1 $300 $250 $252.5 $283.1 $200 $150 $100 $50 $16.6 $21.8 $30.6 $38.8 $48.4 $59.2 $73.7 $89.7 $108.1 $98.4 $112.1 $152.9 $144.0 $ Actual Annualized 4

6 Transaction Overview FCC Environmental (FCCE) Business Transaction Rationale FCCE Base EBITDA Synergy Opportunities Financing Q&A 5

7 FCCE Services Used Oil Filter Collection and Recycling Used Oil Collection and Recycling FCCE Services Vacuum Services Parts Cleaner Services Field Services Used Antifreeze Collection and Recycling 6

8 FCCE Services Used Oil Collection and Recycling 54 Million Gallons (2013) FCCE is the #2 collector of used oil in the USA. Used Oil collections account for two thirds of revenue. Collection of used oil from commercial and industrial sources Oil collected is sold into the recycled fuel oil markets or to oil re-refiners Vacuum & Oily Water Removal Services 55 Million Gallons (2013) Vacuum Services and collection of oily water from customers sites and transport to internal processing facilities The processing facility separates the oil and the water The water is discharged to the local POTW The oil is processed into RFO 7

9 FCCE Services (cont.) Field Services The company provides on-site labor and equipment for various environmental projects Typical projects include storage tank cleaning, oil water separators, ship to shore fluid transfers and other environmental remediation services Parts Cleaner Services Rental of company owned parts cleaners to customers serviced on a regular scheduled basis with virgin solvent Other Commercial Services Waste Paint Recycling, Off Specification Fuel Recycling, and above and below ground tank cleaning 8

10 FCCE Services (cont.) Used Antifreeze Collection and Recycling Used automotive antifreeze, used heat transfer fluids and select industrial by products are recycled at the Richmond, VA facility Selling recycled antifreeze under SureTemp brand Used Oil Filter Collection and Recycling Flexible collection and pick-up of used oil filters in drums, dumpsters or roll off containers Metal is recycled Oil is processed into RFO 9

11 FCCE Service Area FCCE operates ~34 facilities in ~21 states 10

12 Transaction Rationale Rationale for the Acquisition includes: Geographic overlap creates large operational cost synergies, especially in oil collection routes across the Gulf Coast, Southeast and Mid-Atlantic regions Post-acquisition HCC is a 100 MM gals per year used oil collector and a very strong #2 player in the U.S. Increased oil collection will more than fully supply re-refining feedstock of expanded 75 million gallon capacity. 11

13 Transaction Rationale Rationale for the Acquisition also includes: FCCE s 30,000+ customers provide HCC a vehicle for faster growth in Environmental Services segment Substantially larger position in antifreeze recycling market with significant growth prospects and excess recycling capacity FCCE owns significant processing capabilities for vacuum services and oily water waste HCC now has a presence in three phases of the Oil Business Fuel Sales VGO Sales Base Oil Sales 12

14 FCCE Base EBITDA We consider the FCCE business today to operate at breakeven from an adjusted EBITDA perspective In prior years, EBITDA for this business has been as high as $13 MM Most recent results for past three months reflect an average monthly EBITDA $440K (following very weak Q1) We have assumed a Year 1 base EBITDA of $4 MM and have layered our expected synergies and improvements on top of this 13

15 Geographic & Service Overlap Potential to realize cost synergies through facility and route consolidation in the states with dual presence Both companies possess expertise and have a reputation for providing excellent service Common services include collection of used oil, oily water, parts cleaning, vacuum services, spent antifreeze and used oil filters Opportunity to cross-sell services and expand collection network due to larger footprint HCCI Only Service Area HCCI and FCCE Shared Service Area 14

16 Other Synergies and Fit HCCI owns and operates an oil re-refinery in Indianapolis with a 65 million gallon per year capacity which is currently being expanded to 75 million gallon capacity This additional capacity implies need for feedstock for the expanded facility Additional FCC customers also provide opportunity to sell other HCC environmental service immediately. Long track record of growth both organically and through acquisitions. (While at Safety-Kleen current HCC management acquired and integrated oil collection businesses Deffenbaugh's oil recovery (50 MM gpy) and Valvoline First Recovery (60 MM gpy)) 15

17 Summary of Synergies Estimated Total Annual Synergies = $20 Million Oil Collection Routes Vac/Oily Water Routes Facility Consolidation Head Office Consolidation Transportation/ Logistics Parts Cleaning Business Antifreeze Business Insurance 16

18 Example Synergies Oil Route Consolidation An efficient route collects a minimum of 500,000 gals per year on average Pre-acquisition HCC s routes averaged well below this figure Facility Consolidation FCC operates ~34 facilities in their market area and HCC operates a similar number of facilities in this area. Opportunities for consolidation of sites We ve identified overlap between FCCE & HCC in various functions (Operations, IT, HR, Accounting, EH&S, etc.) which presents additional synergy opportunities 17

19 Timing of Synergies Management will begin to execute our assessment and integration plan immediately Synergy realization in Year 1 of $14 MM (before costs to achieve) All synergies realized at 100% in Year 2 and beyond 18

20 Transaction Financing HCC will amend current $40 MM credit facility New credit facility structure - $140 MM $60 million Revolver $80 million Term Loan A Expanded Bank Syndicate Bank of America Lead bank & administrative agent Seven additional banks Financial Covenants Total Leverage ratio Interest Coverage ratio Maximum Capital Expenditures Re-Refinery Expansion Capital 19

21 Questions and Answers 20