HeritageCrystal Clean Inc. (HCCI, Financial) filed Quarterly Report for the period ended 2010-09-11.
Heritagecrystal Clean Inc. has a market cap of $147.1 million; its shares were traded at around $10.35 with a P/E ratio of 41.4 and P/S ratio of 1.5. HCCI is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp, Chuck Royce of Royce& Associates.
For the third fiscal quarter of 2010, sales increased $4.4 million, or 19.7%, to $26.7 million from $22.3 million for the third fiscal quarter of 2009. For the first three quarters of 2010, sales increased $7.7 million, or 11.3%, to $76.1 million from $68.4 million for the first three quarters of 2009. All service type sales grew in the third fiscal quarter of 2010 compared to the third fiscal quarter of 2009 as we continued to add customers and existing customers increased their demand for our services. There was significant growth in the used oil collection program as we continue to expand the collection network. We continue to sell the used oil we collect into the fuel market, which will continue until our used oil re-refinery is in operation, and in the third fiscal quarter of 2010, we sold more volume than we collected, reducing our inventory levels.
For the third fiscal quarter of 2010, operating costs increased $1.4 million, or 11.9%, to $13.2 million from $11.8 million for the third fiscal quarter of 2009. For the first three quarters of 2010, operating costs increased $2.4 million, or 6.6%, to $38.5 million from $36.1 million for the first three quarters of 2009. We incurred branch labor, collection truck and facility costs in connection with new branches opened in the first fiscal quarter of 2010 and additional oil trucks commissioned throughout the first three quarters of 2010. Although these costs have increased year over year, the operating costs as a percentage of sales have declined to 49.3% for the third fiscal quarter 2010 compared to 52.8% for the third fiscal quarter of 2009, and to 50.6% for the first three quarters of 2010 compared to 52.8% for the first three quarters of 2009, as we are able to leverage the operating costs as our revenues grow.
For the third fiscal quarter of 2010, selling, general and administrative expenses increased $0.3 million, or 7.9%, to $4.1 million from $3.8 million for the third fiscal quarter of 2009. For the first three quarters of 2010, selling, general and administrative expenses increased $1.2 million, or 10.3%, to $12.9 million from $11.7 million for the first three quarters of 2009. Selling, general and administrative expenses as a percentage of sales was 17.0% for the first three quarters of 2010, compared to 17.0%, in the first three quarters of 2009. There was an increase in the first three quarters of 2010 which was primarily due to a charge related to a sales tax audit recorded in the first fiscal quarter of 2010 and the increase in the Management Incentive Plan (“MIP”) bonus pool which is aligned with the profitability of operations.
Indiana as our site for the re-refinery, which is also the location of our largest hub. The re-refinery is being designed to process up to 50 million gallons per year of used oil feedstock and produce up to 30 million gallons per year of lubricating base oil. The estimated capital cost of the project is approximately $40.0 million and we expect that the operation of the re-refinery will increase our working capital requirements by $5.0 to $10.0 million. The re-refinery is expected to begin operating in 2012 or earlier, although we expect it will take additional time before we regularly operate at full capacity. As of September 11, 2010, $4.8 million has been capitalized relating to the used oil re-refinery. An additional $5.5 million has been committed for orders for significant equipment related to the used oil re-refinery as of the end of the third fiscal quarter of 2010. We intend to spend approximately $30.0 million in the next 12 months (including approximately $5.0 million for the remainder of 2010) related to the used oil re-refining project. During fiscal 2010 and 2011, we plan to roll out additional used oil collection routes to increase the volume of used oil that we collect and we estimate that we will incur roughly $1.0 million and $1.5 million of net expense, respectively, related to the roll out. We anticipate that we will use existing cash, cash equivalents and available borrowings to fund the expenditures for the used oil re-refining project during this time frame.
We expect that the development and construction of the re-refinery will cost approximately $40.0 million and estimate that the operation of the re-refinery will increase our working capital requirements by $5.0 to $10.0 million. In addition, during our development of the re-refinery, we expect to expand our used oil collection services and expect to incur roughly $1.0 million and $1.5 million of net expense in fiscal 2010 and 2011, respectively, with respect to such efforts. If we are not able to borrow sufficient funds or obtain other sources of financing to complete the re-refinery, we may not be able to complete the re-refinery which could have a material adverse effect on our business. We intend to use the net proceeds from our recent equity offering to fund a portion of the costs of the re-refinery, and expect to obtain the remaining funds needed from our borrowings under our credit agreement. Even if we secure adequate financing, our investments in this project may limit our ability to pursue other opportunities in the future.
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Heritagecrystal Clean Inc. has a market cap of $147.1 million; its shares were traded at around $10.35 with a P/E ratio of 41.4 and P/S ratio of 1.5. HCCI is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp, Chuck Royce of Royce& Associates.
Highlight of Business Operations:
In the first fiscal quarter of 2010, we announced our plans to develop a used oil re-refinery. In the second fiscal quarter of 2010, we secured the required major permits and announced that we selected Indianapolis, Indiana as our site for the re-refinery, which is also the location of our largest hub. In the third fiscal quarter of 2010, we prepared the ground area for the re-refinery and started the installation of footings. The re-refinery is being designed to process up to 50 million gallons per year of used oil feedstock and produce up to 30 million gallons per year of lubricating base oil. The estimated capital cost of the project is approximately $40.0 million and we expect that operation of the re-refinery will increase our working capital requirements by approximately $5.0 to $10.0 million. The re-refinery is expected to begin operating in 2012 or earlier, although we expect it will take additional time before we regularly operate at full capacity. During the design and construction period, we plan to roll out additional used oil collection routes to increase the volume of used oil that we collect and we estimate that during fiscal 2010 and 2011 we will incur net expenses of roughly $1.0 million and $1.5 million, respectively, related to this roll out.For the third fiscal quarter of 2010, sales increased $4.4 million, or 19.7%, to $26.7 million from $22.3 million for the third fiscal quarter of 2009. For the first three quarters of 2010, sales increased $7.7 million, or 11.3%, to $76.1 million from $68.4 million for the first three quarters of 2009. All service type sales grew in the third fiscal quarter of 2010 compared to the third fiscal quarter of 2009 as we continued to add customers and existing customers increased their demand for our services. There was significant growth in the used oil collection program as we continue to expand the collection network. We continue to sell the used oil we collect into the fuel market, which will continue until our used oil re-refinery is in operation, and in the third fiscal quarter of 2010, we sold more volume than we collected, reducing our inventory levels.
For the third fiscal quarter of 2010, operating costs increased $1.4 million, or 11.9%, to $13.2 million from $11.8 million for the third fiscal quarter of 2009. For the first three quarters of 2010, operating costs increased $2.4 million, or 6.6%, to $38.5 million from $36.1 million for the first three quarters of 2009. We incurred branch labor, collection truck and facility costs in connection with new branches opened in the first fiscal quarter of 2010 and additional oil trucks commissioned throughout the first three quarters of 2010. Although these costs have increased year over year, the operating costs as a percentage of sales have declined to 49.3% for the third fiscal quarter 2010 compared to 52.8% for the third fiscal quarter of 2009, and to 50.6% for the first three quarters of 2010 compared to 52.8% for the first three quarters of 2009, as we are able to leverage the operating costs as our revenues grow.
For the third fiscal quarter of 2010, selling, general and administrative expenses increased $0.3 million, or 7.9%, to $4.1 million from $3.8 million for the third fiscal quarter of 2009. For the first three quarters of 2010, selling, general and administrative expenses increased $1.2 million, or 10.3%, to $12.9 million from $11.7 million for the first three quarters of 2009. Selling, general and administrative expenses as a percentage of sales was 17.0% for the first three quarters of 2010, compared to 17.0%, in the first three quarters of 2009. There was an increase in the first three quarters of 2010 which was primarily due to a charge related to a sales tax audit recorded in the first fiscal quarter of 2010 and the increase in the Management Incentive Plan (“MIP”) bonus pool which is aligned with the profitability of operations.
Indiana as our site for the re-refinery, which is also the location of our largest hub. The re-refinery is being designed to process up to 50 million gallons per year of used oil feedstock and produce up to 30 million gallons per year of lubricating base oil. The estimated capital cost of the project is approximately $40.0 million and we expect that the operation of the re-refinery will increase our working capital requirements by $5.0 to $10.0 million. The re-refinery is expected to begin operating in 2012 or earlier, although we expect it will take additional time before we regularly operate at full capacity. As of September 11, 2010, $4.8 million has been capitalized relating to the used oil re-refinery. An additional $5.5 million has been committed for orders for significant equipment related to the used oil re-refinery as of the end of the third fiscal quarter of 2010. We intend to spend approximately $30.0 million in the next 12 months (including approximately $5.0 million for the remainder of 2010) related to the used oil re-refining project. During fiscal 2010 and 2011, we plan to roll out additional used oil collection routes to increase the volume of used oil that we collect and we estimate that we will incur roughly $1.0 million and $1.5 million of net expense, respectively, related to the roll out. We anticipate that we will use existing cash, cash equivalents and available borrowings to fund the expenditures for the used oil re-refining project during this time frame.
We expect that the development and construction of the re-refinery will cost approximately $40.0 million and estimate that the operation of the re-refinery will increase our working capital requirements by $5.0 to $10.0 million. In addition, during our development of the re-refinery, we expect to expand our used oil collection services and expect to incur roughly $1.0 million and $1.5 million of net expense in fiscal 2010 and 2011, respectively, with respect to such efforts. If we are not able to borrow sufficient funds or obtain other sources of financing to complete the re-refinery, we may not be able to complete the re-refinery which could have a material adverse effect on our business. We intend to use the net proceeds from our recent equity offering to fund a portion of the costs of the re-refinery, and expect to obtain the remaining funds needed from our borrowings under our credit agreement. Even if we secure adequate financing, our investments in this project may limit our ability to pursue other opportunities in the future.
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