Heritage-Crystal Clean, Inc Profile
Heritage-Crystal Clean, Inc. provides full-service parts cleaning, hazardous and non-hazardous bulk and containerized waste management, used oil collection, re-refining and lubricating base oil product sales, wastewater vacuum services, antifreeze collection, recycling and product sales, industrial and field services, and emergency and spill response services.
The company is the second largest provider of full-service parts cleaning, hazardous and non-hazardous waste services and used oil collection services to customers in both the industrial and vehicle maintenance sectors in North America. The company is also the second largest used oil re-refiner by capacity in North America, and the second largest producer of remanufactured antifreeze in the United States. The company operates its business through its subsidiary, Heritage-Crystal Clean, LLC.
On August 3, 2022, the company acquired Patriot Environmental Services, Inc. (‘Patriot’), a leading provider of environmental services across the Western United States specializing in a wide variety of waste services, including emergency response, industrial services, and Oil Spill Response Organization (OSRO) spill response.
From the company’s beginning as a parts cleaning and used oil collection service, the company has expanded its range of environmental solutions and continues to build upon its strong foundation to protect the environment for a brighter sustainable future. The company understands that the services the company provides have an impact on the environment, people and the communities in which the company operates.
The company operates within markets for industrial and hazardous waste services in the U.S. and a portion of Ontario, Canada. Specifically, the company focuses on the parts cleaning, hazardous and non-hazardous bulk and containerized waste management, used oil collection, re-refining and base oil sales, wastewater vacuum services, antifreeze collection, recycling and product sales, industrial and field services, and emergency and spill response services markets for small to mid-sized establishments, as well as larger businesses and governmental entities. These establishments have a need to remove contaminants (e.g., grease and dirt) from machine and engine parts and include manufacturers and businesses, which involve vehicle maintenance (e.g., car dealerships, and trucking firms). These businesses typically generate various waste materials (e.g., used oil, waste paint, and antifreeze) that generally cannot be legally discarded as municipal trash or poured down standard drains and they also need assistance with projects to clean tanks, dispose of expired chemicals (i.e., lab packs) and clean up periodic waste or material spills. The company’s customer base consists of over 104,000 active customer locations.
Segments
The company operates its business through its Environmental Services and Oil Business segments.
Environmental Services segment
The company’s Environmental Services segment consists of its full-service parts cleaning, containerized waste management, wastewater vacuum, antifreeze recycling, emergency and spill response, and industrial and field services. These services allow the company’s customers to outsource the handling of their used and regulated materials and related environmental needs. Many of the materials and waste the company manages on behalf of its customers are subject to extensive and complex regulations, and mismanagement can result in citations, penalties, and substantial direct costs both to the service provider and to the generator.
The company allows its customers to focus more on their core business and devote fewer resources to industrial and hazardous waste management and its related administrative burdens.
The company has adopted innovative approaches in its Environmental Services segment to minimize the regulatory burdens for its customers and has made ‘ease of use’ of the company’s services and products a priority. The company has pioneered a program whereby its customers' used parts cleaning solvent may be excluded from the U.S. Environmental Protection Agency's (‘EPA’) definition of hazardous waste. The company’s reuse program (referred to above) and its nonhazardous solvent program not only simplify the management of used solvent generated by the company’s customers, but also reduce the total volume of hazardous waste generated at many of the company’s customers’ locations. This can allow the customer to achieve a lower ‘generator status’ with the EPA and thereby reduce their overall regulatory burden, including reduced reporting obligations and inspections.
The company’s focus on providing ease of use for its customers is also embedded in the other offerings in its Environmental Services segment. As part of the company’s containerized waste and wastewater vacuum programs, the company assists its customers in identifying and characterizing their regulated wastes, as well as providing the proper labeling and shipping documentation for their regulated materials. In certain portions of the company’s service geography, it provides customers with in-house treatment of their regulated wastewater as part of its wastewater vacuum services and oily water collection programs.
The company’s antifreeze recycling service offers its customers a fully-compliant method to safely manage their used antifreeze while providing a high quality, environmentally friendly, remanufactured product, which allows them to further their sustainability goals. Similarly, through the company’s industrial and field services, as well as emergency spill response services, the company brings properly trained personnel and required equipment to project sites along with overall project management which allows the company’s customers to focus on their core business activities while the company manages non-core activities, such as lab packs, tank cleanings, and spill clean-up.
Oil Business segment
The Oil Business segment consists of used oil collection activities, re-refining activities, oil filter removal and disposal services, and the sale of recycled fuel oil. Through the company’s re-refining process, the company recycles used oil into high quality lubricating base oil and other products. The company is a supplier to firms that produce and market finished lubricants. This program allows the company’s used oil collection customers to positively impact the environment by contributing to the reduction of the use of crude oil to produce lubricating base oil. Using crude oil to produce lubricating base oil has been found to be more energy intensive compared to manufacturing lubricating base oil from used oil. It also reduces greenhouse gas emissions when compared to burning used oil as fuel.
The company operates a used oil re-refinery with an annual nameplate output of lubricating base oil, which has a nameplate capacity of 50 million gallons. The company is feeding the re-refinery with a combination of used oil collected from the company’s customers and used oil that the company purchases from third parties.
The Crystal Clean Solution
Environmental Services segment
During the year ended December 31, 2022 (‘fiscal 2022’), the company performed more than 679,000 environmental services. The company is structured to meet the needs of vehicle maintenance businesses, medium sized manufacturers, and large governmental entities. The company’s services are highly attractive to the company’s customers, who value features, such as assistance in preparing waste manifests and drum labels, regularly-scheduled service visits to check inventories and remove accumulated waste, and minimizing the number of vendors they must deal with related to the management of these materials. As a result of the company’s acquisition of Patriot, its expanded service menu allows the company to better meet the environmental needs of both smaller and larger clients.
Oil Business segment
Through the company’s used oil collection service, it collects the used oil generated by the company’s customers when they replace used lubricating oil in vehicles and machinery. Most customers store the used oil they generate in tanks, which must be emptied regularly to mitigate the risk of overflow or termination of their oil change or maintenance activities. As a result, these customers have a strong need for timely used oil service. The company has designed its services to deliver regularly-scheduled pickups, as well as the capability to respond to unscheduled requests on short notice. The used oil the company collects is either transported to the company’s used oil re-refinery or processed into RFO. When the company re-refines or recycles used oil, the company is able to provide its customers with the satisfaction that their used oil is re-refined into high quality lubricants, using the approach cited as preferred by the EPA. As the marketplace places a higher priority on environmental, social and governance issues, re-refining appears to be viewed as more valuable among used oil generators.
At the company’s used oil re-refinery in Indianapolis, Indiana, the company re-refines used oil collected from its customers, or purchased from other used oil collection service providers, into lubricating base oil that the company sells to firms who then blend, package, and market finished lubricants. The nameplate capacity is 75 million gallons of annual input of used oil feedstock, including the impact of periodic shutdowns to perform routine maintenance. In fiscal 2022, the company collected approximately 75 million gallons of used oil from its customers.
Services
Across the company’s range of services, the company focuses on reducing its customers' burdens associated with their generation of hazardous and non-hazardous wastes. The company’s services allow customers to focus more on their core business and devote fewer resources to industrial and hazardous waste management.
Environmental Services segment
In the company’s full-service parts cleaning business, the company provides customers with parts cleaning equipment and chemicals to remove oil, grease, and other contaminants from engine parts and machine parts. Most commonly, the company provides a parts cleaning machine that contains either a petroleum or aqueous-based solvent in a reservoir. The company provides various models of parts cleaning equipment, which include both manual and automated cleaning. The solvent or cleaning solution can be reused until the contamination level is too high to allow for proper cleaning and requires replacement.
The company typically visits its customers every 4 to 12 weeks to remove the used solvent and replace it with clean solvent, while at the same time cleaning and inspecting the parts cleaning equipment to ensure that it is functioning properly and assisting the company’s customers with relevant regulatory paperwork. There are still many parts cleaning services performed in the U.S., which are structured as hazardous waste services, meaning that when the solvent has been used, it is managed as a regulated hazardous waste subject to numerous laws and regulatory filings. The company reduces this burden for its customers by offering three alternative parts cleaning programs (its non-hazardous and reuse programs for mineral spirits parts cleaning and the company’s aqueous parts cleaning program) that do not subject the customer to the same hazardous waste regulations. These lower-burden approaches help certain customers to achieve regulatory compliance while minimizing the paperwork and bureaucracy associated with hazardous waste management - ultimately saving them time and money. For example, these programs enable many of the company’s customers to reduce their generation of hazardous wastes below the 220 pounds per month maximum threshold for retaining the Federal EPA generator status of Very Small Quantity Generator (‘VSQG’). For most of the company’s customers, maintaining a VSQG status provides significant savings associated with not having to maintain an EPA identification number; prepare, track, and file transportation manifests; or produce other reports related to the use, storage, and disposal of used solvents. The company offers a wide variety of different models of parts cleaning machines from which the company’s customers may choose the machine that best fits their specific parts cleaning needs. While the majority of the company’s customers are provided or sold machines directly from the company, it also offer parts cleaning services for customers who purchase their parts cleaning machines from other sources. The company offers a variety of petroleum solvents and aqueous chemicals for use in parts cleaning machines. The company also has a wide range of service schedules from weekly service visits to triannual service visits.
In the company’s containerized waste service, the company collects drums, pails, boxes, and other containers of hazardous and non-hazardous waste materials from the company’s customers. Typical wastes from vehicle maintenance include used antifreeze, used oil filters, waste paint, and used absorbent material. Typical wastes from manufacturing and industrial operations include waste paint and solvents, oily water wastes, used absorbents, discarded fluorescent lighting tubes and spent batteries. The company endeavors to find the lowest burden regulatory approach for managing each of these materials for the company’s clients. In some cases, the company can develop lower burden alternatives based on recycling materials for component recovery, such as with oil filters, or by following the less onerous universal waste regulations, such as with fluorescent tubes, aerosol cans and waste paint. In other cases, the hazardous waste regulations may apply, in which case the company assists customers with the hazardous waste disposal process, including performing analysis to characterize their waste, preparing manifests and drum labels, and selecting the appropriate destination facility. As part of the company’s comprehensive service approach, the company visits its customers periodically to check their inventory of used or waste materials and remove full containers as appropriate. Because there are statutory limits on the amount of time that customers can store these waste materials, these service visits are valuable to help customers stay in compliance. To the extent that the company can coordinate these service visits together with a regularly scheduled parts cleaning service, the company is able to perform both tasks during the same visit, with the same truck and service employee. For a growing portion of the non-hazardous waste the company collects in its containerized waste program, the company consolidates the waste from containers (e.g. drums, etc.) picked up from the company’s customers into large rolloff boxes at one of its non-hazardous waste processing facilities. This consolidation process allows the company to deliver waste material in bulk to the final treatment and disposal site at a lower cost than if the company was to send the containers directly to the final disposal site. At these same facilities the company also performs solidification activities through which non-hazardous liquid wastes are mixed with materials, such as saw dust or other absorbent materials to create a solid waste which becomes less costly to dispose of at the final, third-party disposal site. For the remainder of the containerized waste the company collects from customers, the company ships the waste containers from its branch locations to one of its hub facilities and finally to a third party disposal vendor.
In a majority of the company’s branch locations, the company provides wastewater vacuum services for the removal of mixtures of oil, water, and sediment from wastewater pretreatment devices and other sources. Many shops and plants have floor drain systems that lead to pits, sumps, or separators that are designed to separate and retain oil and dirt, but allow clear water to flow out to a municipal sewer. Periodically, these drains and collection points accumulate excess oil or sediment needing removal. Because some of the material is very thick, a specialized vacuum is utilized for efficient removal of the material. The company’s wastewater vacuum service includes the removal of the oil, water, and sediment so that the customer's equipment operates as intended. The company also offers bulk oily water removal. These services are scheduled on a regular basis. The company offers vacuum service at 71 of the company’s branches. The company has the opportunity to grow this business by adding vacuum service to most of the company’s remaining branches. The company operates ten commercial wastewater treatment facilities that allow the company to remove oil from wastewater, treat the wastewater, and discharge it according to the standards of the applicable discharge permits.
Through the company’s antifreeze recycling service, the company offers customers a legally-compliant method to safely manage their used antifreeze while providing a full line of high quality, environmentally friendly, remanufactured products. The company offers responsive, on-time scheduled or on-demand collection and transportation of used antifreeze to the company’s five antifreeze recycling facilities, where the waste antifreeze is recycled into high quality ethylene glycol or an ethylene glycol and water mixture. From there the company adds high quality inhibitors to produce a full line of virgin-quality antifreeze products. The company then sells the remanufactured antifreeze products primarily to the company’s vehicle maintenance customers.
The company also offers a variety of industrial and field services to assist customers with on-site equipment and tank cleaning, as well as the removal and proper management of various types of waste. Typical projects include lab pack services, soil remediation services, the cleaning of above ground storage tanks, sumps, separators, ship-to-shore fluid transfers, and other environmental remediation services. In the western U.S., the company typically uses HCC employees to perform a majority of the work for the company’s industrial and field services projects. In the remainder of the U.S. and eastern Canada, the company serves as a contractor and project manager while engaging subcontractors or outsourced labor, equipment, transportation and disposal when performing industrial and field services projects.
Oil Business segment
As of the end of fiscal 2022, the company offered bulk used oil collection services in 86 of the company’s branch locations. Although the company manages some used oil through the company’s containerized waste program, most customers who generate used oil (typically from vehicle engine oil changes) produce large quantities that are stored in bulk tanks. These volumes are handled more efficiently via bulk tank trucks, such as the type the company utilizes, where the company pumps the customer's material into the company’s tank truck for proper handling. The company transfers a majority of the used oil the company collects to its re-refinery to be re-refined into lubricating base oil. From time-to-time, the company also engages in swaps of used oil with other re-refiners or used oil processors. The company recycles the remaining used oil into RFO, some of which is sold to industrial burners, such as asphalt plants that use the RFO as a less expensive substitute for other fuels. The company also sells RFO to be used in other niche applications (e.g. in the mining industry). As with the company’s other services, the company offers to visit customers on a regularly scheduled basis to arrange for the removal of their accumulated oil.
Growth Strategies
The company has several different strategies, which include same-branch sales growth; expanded service offerings; geographic expansion; and selectively pursuing acquisition opportunities.
Sales and Marketing
In addition to the efforts of the company’s SSRs (Sales & Service Representatives), the company employs a branch manager at each of the company’s branches, and the company also employs branch sales managers at its branches, all of whom have dedicated sales territories and responsibilities.
The company also has a corporate accounts sales team dedicated to pursuing larger and geographically dispersed opportunities. In the company’s industrial and field services business the company employs managers who are both responsible for sales, as well as the operation and execution of the projects and services sold to the company’s customers.
Suppliers and Recycling/Disposal Facilities
To support the company’s traditional branch business, the company purchases goods, such as parts cleaning machines, solvent (petroleum naphtha mineral spirits), cleaning chemicals, bulk used oil, bulk antifreeze (ethylene glycol) and used antifreeze, and absorbent from a limited group of suppliers. In the company’s industrial and field services business, the company utilizea vendors who provide labor and equipment for the projects the company sells and manages. The company also has arrangements with various firms that can recycle, burn, or dispose of the waste materials the company collects from customers and generates from the company’s waste processing activities. Heritage Environmental Services, an affiliate of The Heritage Group, Fred Fehsenfeld and the Fehsenfeld family trusts, which collectively beneficially owned 31.2% of the company’s common stock as of December 31, 2022, operates one of the largest privately-owned hazardous waste treatment businesses in the U.S.
The company operates 10 non-hazardous waste processing facilities. Most of these facilities contain a centralized wastewater treatment (CWT) operation. The CWT facilities allow the company to remove oil from wastewater, treat the wastewater, and then discharge it according to the standards in the applicable discharge permits. These facilities allow the company the flexibility to dispose of the company’s oily water and wastewater vacuum services wastewater collected from customers in certain branch territories internally, as well as accepting wastewater from the company’s customers directly at most of these facilities. Some of the company’s non-hazardous waste processing facilities also consolidate and/or solidify non-hazardous solid, semi-solid, and liquid waste streams. These wastes are shipped to these sites from the company’s branch network or the waste may be shipped directly from the company’s customers to these sites.
Seasonality
Typically, during the first quarter (year ended December 2022) and the end of the fourth quarter of each year there is less demand for most of the company’s products and services due to the lower levels of activities by the company’s customers as a result of the cold weather, particularly in the Northern and Midwestern regions of the United States. This lower level of activity also results in lower volumes of used oil generated for collection by the company in the first quarter. In the winter months there is less construction activity, which reduces demand for certain re-refinery products. In addition, factory closings for the year-end holidays reduce the volume of industrial waste generated, which results in lower volumes of waste handled by the company during the first quarter of the following year. However, the company generally experiences the opposite seasonality impact (higher levels of activity in the first quarter and end of the fourth quarter) in the company’s antifreeze business.
Intellectual Property
The company’s intellectual property includes the Crystal Clean brand and logo, as well as the company’s patented aqueous parts cleaning equipment, chemistry formulae, and filtration technology. If the company exercises all of the extensions available via the United States Patent and Trademark Office for its existing patents, the patents will expire at various times between 2023 and 2025.
Regulation
All of the company’s recycling, used oil and oily water processing facilities hold CWA National Pollution Discharge Elimination System (‘NPDES’) permits for stormwater runoff and water pollution prevention.
The company’s transportation fleet, truck drivers, and the transportation of hazardous materials are regulated by the U.S. Department of Transportation (‘DOT’) Motor Carrier and the Federal Railroad Administration (‘FRA’), as well as by the regulatory agencies of each state in which the company operates or through which the company’s vehicles pass.
The Department of Labor Occupational Safety & Health Administration (‘OSHA’) safety standards are applicable to all of the company’s operations.
Research and Development
The company’s research and development costs were $0.3 million during fiscal 2022.
Competition
The company’s largest competitor is Safety-Kleen (a wholly-owned subsidiary of Clean Harbors, Inc.).
History
Heritage-Crystal Clean, Inc. was incorporated in 2007 under the laws of the state of Delaware.
