NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying consolidated interim financial statements are unaudited and include the accounts of Clean Harbors, Inc. and its subsidiaries (collectively, “Clean Harbors,” the “Company” or "we") and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Management has made estimates and assumptions affecting the amounts reported in the Company's consolidated interim financial statements and accompanying footnotes, actual results could differ from those estimates and judgments. The results for interim periods are not necessarily indicative of results for the entire year or any other interim periods. The financial statements presented herein should be read in connection with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018
.
(2) SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are described in Note 2, "Significant Accounting Policies," and Note 3, "Revenues," in the Company's Annual Report on Form 10-K for the year ended
December 31, 2018
. There have been no material changes in these policies or their application except for the changes described below.
Recent Accounting Pronouncements
Standards implemented
In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02,
Leases (Topic 842)
. The amendment increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted Topic 842 on January 1, 2019 using the modified retrospective method of adoption. Prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historical accounting methodology pursuant to ASC 840,
Leases
. As permitted under the transition guidance, the Company elected to apply the package of three practical expedients for all existing leases which, among other things, allowed us to maintain the lease classification for all existing leases at the adoption date. The adoption of Topic 842 resulted in the recognition of right-of-use (“ROU”) assets of
$185.5 million
and total current and noncurrent lease liabilities of
$188.5 million
at adoption. Additionally, Topic 842 required new and expanded disclosures to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The standard did not have a material impact on the consolidated statements of operations or cash flows.
Leases
The Company’s leases predominately relate to real estate and equipment such as vehicles and industrial equipment utilized in operations as well as rail cars utilized in connection with the Company’s transportation needs. Contracts are reviewed at inception to determine if the arrangement is a lease and, if so, whether it is an operating or finance lease. For all of its leases, the Company has elected not to separate lease and nonlease components, such as common area maintenance.
The Company generally enters into real estate leases with five to ten-year terms and non-real estate leases with two to seven-year terms. In the normal course of business, the Company also enters into short-term leases having terms of less than one-year. These leases are generally equipment leases entered into for short periods of time (e.g. daily, weekly or monthly), and done so to satisfy immediate and/or short-term operational needs of the business which can arise based upon the nature of particular services performed or seasonality factors. The Company has elected not to recognize ROU assets and lease liabilities for these short-term leases. Expense for all such short-term leases is disclosed as short-term lease cost as shown in Note 17, "Leases."
Operating and finance leases with terms exceeding one year are recognized as ROU assets and lease liabilities and measured based on the present value of the future lease payments over the lease term at commencement date. When applicable, the ROU asset includes any lease payments made at or before the commencement date and initial direct costs incurred and is reduced by lease incentives received under the lease agreement, if any.
Certain of the Company's real estate leases contain escalating future lease payments. Escalating lease payments that are based upon explicit amounts contained in the lease or an index (e.g., consumer price index) are included in its determination of future lease payments to determine the ROU asset and lease liability recognized at the commencement date. Any differences in the future lease
payments from initial recognition are not anticipated to be material and will be recorded as variable lease cost in the period incurred. The variable lease cost will also include the Company’s portion of property tax, utilities and common area maintenance. A significant portion of the Company’s real estate lease agreements include renewal periods at the Company’s option. The Company includes these renewal periods in the lease term only when renewal is reasonably certain based upon facts and circumstances specific to the lease and known by the Company. The Company uses its incremental borrowing rate on collateralized debt based on the information available at the lease commencement date in determining the present value of future lease payments as the implicit rate is typically not readily determinable.
(3) REVENUES
Revenue Recognition
The Company generates services and product revenues through the following operating segments: Environmental Services and Safety-Kleen. The Company recognizes revenue when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Product revenues are recognized when the products are delivered and control transfers to the customer.
Nature of Goods and Services
The majority of the Company’s contracts are for services, which are recognized based on time and materials incurred at contractually agreed-upon rates. The Company’s payment terms vary by the type and location of its customers and the products or services offered. The periods between invoicing and when payments are due are not significant. Any amounts billed to customers related to shipping and handling are classified as revenue and the Company's shipping and handling costs are included in costs of revenues. In the course of the Company's operations, it collects sales tax and other excise taxes from its customers and recognizes a current liability which is then relieved when the taxes are remitted to the appropriate governmental authorities. The Company excludes sales and other excise taxes that it collects from customers from its revenues.
Disaggregation of Revenue
The following table presents the Company’s third-party revenues disaggregated by revenue source (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
|
|
Environmental Services
|
|
Safety-Kleen
|
|
Corporate
|
|
Total
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
388,169
|
|
|
$
|
286,574
|
|
|
$
|
594
|
|
|
$
|
675,337
|
|
Canada
|
|
85,529
|
|
|
19,973
|
|
|
—
|
|
|
105,502
|
|
Total third-party revenues
|
|
$
|
473,698
|
|
|
$
|
306,547
|
|
|
$
|
594
|
|
|
$
|
780,839
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
(1)
|
|
|
|
|
|
|
|
|
Technical Services
|
|
$
|
251,919
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
251,919
|
|
Field and Emergency Response Services
|
|
71,626
|
|
|
—
|
|
|
—
|
|
|
71,626
|
|
Industrial Services
|
|
116,098
|
|
|
—
|
|
|
—
|
|
|
116,098
|
|
Oil, Gas and Lodging Services and Other
|
|
34,055
|
|
|
—
|
|
|
594
|
|
|
34,649
|
|
Safety-Kleen Environmental Services
|
|
—
|
|
|
207,083
|
|
|
—
|
|
|
207,083
|
|
Safety-Kleen Oil
(2)
|
|
—
|
|
|
99,464
|
|
|
—
|
|
|
99,464
|
|
Total third-party revenues
|
|
$
|
473,698
|
|
|
$
|
306,547
|
|
|
$
|
594
|
|
|
$
|
780,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2018
|
|
|
Environmental Services
|
|
Safety-Kleen
|
|
Corporate
|
|
Total
|
Primary Geographical Markets
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
343,972
|
|
|
$
|
287,642
|
|
|
$
|
145
|
|
|
$
|
631,759
|
|
Canada
|
|
95,716
|
|
|
22,276
|
|
|
27
|
|
|
118,019
|
|
Total third-party revenues
|
|
$
|
439,688
|
|
|
$
|
309,918
|
|
|
$
|
172
|
|
|
$
|
749,778
|
|
|
|
|
|
|
|
|
|
|
Sources of Revenue
(1)
|
|
|
|
|
|
|
|
|
Technical Services
|
|
$
|
236,306
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
236,306
|
|
Field and Emergency Response Services
|
|
69,935
|
|
|
—
|
|
|
—
|
|
|
69,935
|
|
Industrial Services
|
|
103,763
|
|
|
—
|
|
|
—
|
|
|
103,763
|
|
Oil, Gas and Lodging Services and Other
|
|
29,684
|
|
|
—
|
|
|
172
|
|
|
29,856
|
|
Safety-Kleen Environmental Services
|
|
—
|
|
|
194,161
|
|
|
—
|
|
|
194,161
|
|
Safety-Kleen Oil
(2)
|
|
—
|
|
|
115,757
|
|
|
—
|
|
|
115,757
|
|
Total third-party revenues
|
|
$
|
439,688
|
|
|
$
|
309,918
|
|
|
$
|
172
|
|
|
$
|
749,778
|
|
______________________
|
|
(1)
|
All revenue except oil and oil product sales within Safety-Kleen Oil and product sales within Safety-Kleen Environmental Services, which include various automotive related fluids, shop supplies and direct blended oil sales, are recognized over time. Safety-Kleen Oil and Safety-Kleen Environmental Services product sales are recognized at a point in time.
|
|
|
(2)
|
Safety-Kleen Oil was formerly known as Kleen Performance Products.
|
Technical Services.
Technical Services revenues are generated from fees charged for waste material management and disposal services including onsite environmental management services, collection and transportation, packaging, recycling, treatment and disposal of waste. Revenue is primarily generated by short-term projects, most of which are governed by master service agreements that are long-term in nature. These master service agreements are typically entered into with the Company's larger customers and outline the pricing and legal frameworks for such arrangements. Services are provided based on purchase orders or agreements with the customer and include prices based upon units of volume of waste and transportation and other fees. Collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Revenues for treatment and disposal of waste are recognized upon completion of treatment, final disposition in a landfill or incineration or when the waste is shipped to a third party for processing and disposal. The Company periodically enters into bundled arrangements for the collection and transportation and disposal of waste. For such arrangements, transportation and disposal are considered distinct performance obligations and the Company allocates revenue to each based on their relative standalone selling price (i.e., the estimated price that a customer would pay for the services on a standalone basis). Revenues from waste that is not yet completely processed and disposed and the related costs are deferred. The revenue is recognized and the deferred costs are expensed when the related services are completed. The period between collection and transportation and the final processing and disposal ranges depending on the location of the customer, but generally is measured in days.
Field and Emergency Response Services.
Field Services revenues are generated from cleanup services at customer sites, including municipalities and utilities, or other locations on a scheduled or emergency response basis. Services include confined space entry for tank cleaning, site decontamination, large remediation projects, demolition, spill cleanup on land and water, railcar cleaning, product recovery and transfer and vacuum services. Additional services include filtration and water treatment services. Response services for environmental emergencies include any scale from man-made disasters such as oil spills, to natural disasters such as hurricanes. These services are provided based on purchase orders or agreements with customers and include prices generally based upon daily, hourly or job rates for equipment, materials and personnel. The Company recognizes revenue for these services over time, as the customer receives and consumes the benefits of the service as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. The duration of such services can be over a number of hours, days or even months for larger scale projects.
Industrial Services.
Industrial Services revenues are generated from industrial and specialty services provided to refineries, mines, upgraders, chemical plants, pulp and paper mills, manufacturing facilities, power generation facilities and other industrial customers throughout North America. Services include in-plant cleaning and maintenance services, plant outage and turnaround services, decoking and pigging, chemical cleaning, high and ultra-high pressure water cleaning, pipeline inspection and coating
services, large tank and surface impoundment cleaning, oilfield transport, daylighting, production services and directional boring services supporting drilling, completions and production programs. These services are provided based on purchase orders or agreements with the customer and include prices based upon daily, hourly or job rates for equipment, materials and personnel. The Company recognizes revenue for these services over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred.
Oil, Gas and Lodging Services and Other.
Oil, Gas and Lodging Services and Other is primarily comprised of revenues generated from providing Oil and Gas Field Services that support upstream activities such as exploration and drilling for oil and gas companies and Lodging Services to customers in Western Canada. The Company recognizes Oil and Gas Field Services revenue over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Revenue for lodging accommodation services is recognized over time based on passage of time.
Safety-Kleen Environmental Services.
Safety-Kleen Environmental Services revenues are generated from providing parts washer services, containerized waste handling and disposal services, oil collection services, direct sales of blended oil products and other complementary services and product sales through a network of branch locations. Containerized waste services consist of profiling, collecting, transporting and recycling or disposing of a wide variety of waste. Other products and services include vacuum services, sale of complementary supply products including automotive fluids and shop supplies and other environmental services. Revenues from parts washer services include fees charged to customers for their use of parts washer equipment, to clean and maintain parts washer equipment and to remove and replace used cleaning fluids. Parts washer services are considered a single performance obligation due to the highly integrated and interdependent nature of the arrangement. Revenue from parts washer services is recognized over the service interval as the customer receives the benefit of the services. Collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Product revenue is recognized upon the transfer of control whereby control transfers when the products are delivered to the customer.
Safety-Kleen Oil.
Safety-Kleen Oil revenues are generated from sales of high-quality base and blended lubricating oils to third-party distributors, government agencies, fleets, railroads and industrial customers. The business also sells recycled fuel oil to asphalt plants, industrial plants, blenders, pulp and paper companies, vacuum gas oil producers and marine diesel oil producers. Revenue for oil products is recognized at a point in time, upon the transfer of control. Control transfers when the products are delivered to the customer.
Contract Balances
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Receivables
|
|
$
|
613,507
|
|
|
$
|
606,952
|
|
Contract assets (unbilled receivables)
|
|
42,513
|
|
|
54,794
|
|
Contract liabilities (deferred revenue)
|
|
67,557
|
|
|
61,843
|
|
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits or deferred revenue (contract liabilities) on the consolidated balance sheets. Generally, billing occurs subsequent to revenue recognition, as a right to payment is not just subject to passage of time, resulting in contract assets. Contract assets are generally classified as current. The Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. As part of the acquisition of the Veolia Business (as defined in Note 4, "Business Combinations") on February 23, 2018, the Company acquired receivables and contract assets of
$21.5 million
and
$18.1 million
, respectively. Changes in the contract asset and liability balances during the three-month periods ended
March 31, 2019
and
December 31, 2018
were not materially impacted by any other factors. The contract liability balances at the beginning of each period presented were fully recognized in the subsequent three-month period.
Variable Consideration
The nature of the Company's contracts give rise to certain types of variable consideration, including in limited cases volume discounts. Accordingly, management establishes a revenue allowance to cover the estimated amounts of revenue that may need to be credited to customers' accounts in future periods. The Company estimates the amount of variable consideration to include in the
estimated transaction price based on historical experience, anticipated performance and its best judgment at the time and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Contract Costs
Contract costs include direct and incremental costs to obtain or fulfill a contract. The Company’s contract costs that are subject to capitalization are comprised of costs associated with parts washer services and costs associated with the treatment and disposal of waste. Parts washer costs include costs of solvent, commissions paid relating to revenue generated from parts washer services and transportation costs associated with transferring the product picked up from the services as it is returned to the Company’s facilities or a third-party site. Costs related to the treatment of waste include costs for waste receiving, drum movement and storage, waste consolidation and transportation between facilities. Deferred costs associated with parts washer services are amortized ratably over the average service interval, which ranges between seven and 14 weeks. Deferred costs related to treatment and disposal of waste are recognized when the corresponding waste is disposed of and are included in deferred costs within total current assets in the Company’s Consolidated Balance Sheets. The deferred contract cost balances at the beginning of each period presented were fully recognized in cost of revenue in the subsequent three-month period.
(4) BUSINESS COMBINATIONS
2019 Acquisition
On March 1, 2019, the Company acquired certain assets of a privately-owned company for
$10.4 million
. The acquired assets complement the Safety-Kleen segment's core service offerings, such as used motor oil collection, parts washers, oil filter recycling and vacuum services. In connection with this acquisition, a preliminary goodwill amount of
$6.8 million
was recognized.
2018 Acquisitions
On August 31, 2018, the Company acquired a privately-owned company which expands the environmental services and waste oil capabilities of the Company for a
$27.3 million
purchase price, net of cash. The acquired company is included in the Safety-Kleen and Environmental Services segments. In connection with this acquisition, a preliminary goodwill amount of
$12.4 million
was recognized. The results of operations of this acquired business were not material in 2019.
On February 23, 2018, the Company completed the acquisition of the U.S. Industrial Cleaning Business of Veolia Environmental Services North America LLC (the "Veolia Business"). The acquisition provides significant scale and industrial services capabilities while increasing the size of the Company's existing U.S. Industrial Services business. The Company acquired the Veolia Business for a purchase price of
$124.5 million
. The amount of pre-tax income for the three months ended March 31, 2018 was immaterial. During the
three
months ended
March 31, 2019
, the Veolia Business was fully integrated into the Environmental Services segment, and therefore it is impracticable to measure earnings attributable to the Veolia Business for that period.
The Company finalized purchase accounting for the Veolia Business in the first quarter of 2019. The components and allocation of the purchase price for the Veolia Business consist of the following amounts (in thousands):
|
|
|
|
|
|
Final Allocation
|
Accounts receivable, including unbilled receivables
|
$
|
39,558
|
|
Inventories and supplies
|
1,126
|
|
Prepaid expenses and other current assets
|
828
|
|
Property, plant and equipment
|
72,243
|
|
Permits and other intangibles
|
5,140
|
|
Current liabilities
|
(18,372
|
)
|
Closure and post-closure liabilities
|
(354
|
)
|
Total identifiable net assets
|
100,169
|
|
Goodwill
|
24,331
|
|
Total purchase price
|
$
|
124,500
|
|
The weighted average amortization period for the intangibles acquired is
8.2 years
. The excess of the total purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible net assets and intangible assets
acquired, was recorded as goodwill. The goodwill recognized is attributable to the expected operating synergies and growth potential that the Company expects to realize from this acquisition. Goodwill generated from the acquisition is deductible for tax purposes.
(5) INVENTORIES AND SUPPLIES
Inventories and supplies consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Oil and oil products
|
$
|
67,888
|
|
|
$
|
70,823
|
|
Supplies and drums
|
108,976
|
|
|
104,609
|
|
Solvent and solutions
|
10,500
|
|
|
10,657
|
|
Other
|
13,450
|
|
|
13,390
|
|
Total inventories and supplies
|
$
|
200,814
|
|
|
$
|
199,479
|
|
Supplies and drums consist primarily of drums and containers used in providing the Company's products and services as well as critical spare parts to support the Company's incinerator and re-refinery operations. Other inventories consisted primarily of parts washer components, cleaning fluids, absorbents and automotive fluids, such as windshield washer fluid and antifreeze.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Land
|
$
|
129,684
|
|
|
$
|
123,734
|
|
Asset retirement costs (non-landfill)
|
15,258
|
|
|
15,148
|
|
Landfill assets
|
160,093
|
|
|
154,918
|
|
Buildings and improvements
(1)
|
465,707
|
|
|
440,188
|
|
Camp equipment
|
156,031
|
|
|
152,998
|
|
Vehicles
|
753,490
|
|
|
721,735
|
|
Equipment
|
1,711,470
|
|
|
1,697,490
|
|
Furniture and fixtures
|
5,476
|
|
|
5,453
|
|
Construction in progress
|
27,028
|
|
|
20,931
|
|
|
3,424,237
|
|
|
3,332,595
|
|
Less - accumulated depreciation and amortization
|
1,835,624
|
|
|
1,770,617
|
|
Total property, plant and equipment, net
|
$
|
1,588,613
|
|
|
$
|
1,561,978
|
|
______________________
(1) Inclusive of finance lease.
Interest in the amount of
$0.1 million
and
$0.3 million
was capitalized to property, plant and equipment during the
three
months ended
March 31, 2019
and
March 31, 2018
, respectively. Depreciation expense, inclusive of landfill and finance lease amortization, was
$65.9 million
and
$65.6 million
for the
three
months ended
March 31, 2019
and
March 31, 2018
, respectively.
(7) GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in goodwill by segment for the
three
months ended
March 31, 2019
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmental Services
|
|
Safety-Kleen
|
|
Totals
|
Balance at January 1, 2019
|
$
|
207,019
|
|
|
$
|
307,170
|
|
|
$
|
514,189
|
|
Increase from current period acquisitions
|
—
|
|
|
6,825
|
|
|
6,825
|
|
Measurement period adjustments from prior period acquisitions
|
(2,571
|
)
|
|
(1,422
|
)
|
|
(3,993
|
)
|
Foreign currency translation
|
412
|
|
|
477
|
|
|
889
|
|
Balance at March 31, 2019
|
$
|
204,860
|
|
|
$
|
313,050
|
|
|
$
|
517,910
|
|
The Company assesses goodwill for impairment on an annual basis as of December 31 or at an interim date when events or changes in the business environment would more likely than not reduce the fair value of a reporting unit below its carrying value.
As of
March 31, 2019
and
December 31, 2018
, the Company's total intangible assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
Permits
|
$
|
180,463
|
|
|
$
|
81,135
|
|
|
$
|
99,328
|
|
|
$
|
177,583
|
|
|
$
|
79,358
|
|
|
$
|
98,225
|
|
Customer and supplier relationships
|
397,949
|
|
|
187,195
|
|
|
210,754
|
|
|
393,487
|
|
|
179,824
|
|
|
213,663
|
|
Other intangible assets
|
37,616
|
|
|
31,363
|
|
|
6,253
|
|
|
37,262
|
|
|
29,743
|
|
|
7,519
|
|
Total amortizable permits and other intangible assets
|
616,028
|
|
|
299,693
|
|
|
316,335
|
|
|
608,332
|
|
|
288,925
|
|
|
319,407
|
|
Trademarks and trade names
|
122,623
|
|
|
—
|
|
|
122,623
|
|
|
122,468
|
|
|
—
|
|
|
122,468
|
|
Total permits and other intangible assets
|
$
|
738,651
|
|
|
$
|
299,693
|
|
|
$
|
438,958
|
|
|
$
|
730,800
|
|
|
$
|
288,925
|
|
|
$
|
441,875
|
|
Amortization expense of permits and other intangible assets was
$9.5 million
and
$9.2 million
in the
three
months ended
March 31, 2019
and
March 31, 2018
, respectively.
The expected amortization of the net carrying amount of finite-lived intangible assets at
March 31, 2019
was as follows (in thousands):
|
|
|
|
|
Years Ending December 31,
|
Expected Amortization
|
2019 (nine months)
|
$
|
24,947
|
|
2020
|
31,289
|
|
2021
|
28,020
|
|
2022
|
27,849
|
|
2023
|
23,862
|
|
Thereafter
|
180,368
|
|
|
$
|
316,335
|
|
(8) ACCRUED EXPENSES
Accrued expenses consisted of the following at
March 31, 2019
and
December 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Insurance
|
$
|
64,298
|
|
|
$
|
70,217
|
|
Interest
|
14,783
|
|
|
3,930
|
|
Accrued compensation and benefits
|
46,757
|
|
|
77,881
|
|
Income, real estate, sales and other taxes
|
30,289
|
|
|
25,670
|
|
Other
|
52,259
|
|
|
55,707
|
|
|
$
|
208,386
|
|
|
$
|
233,405
|
|
(9) CLOSURE AND POST-CLOSURE LIABILITIES
The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) from
January 1, 2019
through
March 31, 2019
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Landfill
Retirement
Liability
|
|
Non-Landfill
Retirement
Liability
|
|
Total
|
Balance at January 1, 2019
|
$
|
37,809
|
|
|
$
|
32,122
|
|
|
$
|
69,931
|
|
Liabilities assumed in acquisition
|
—
|
|
|
98
|
|
|
98
|
|
New asset retirement obligations
|
719
|
|
|
—
|
|
|
719
|
|
Accretion
|
742
|
|
|
689
|
|
|
1,431
|
|
Changes in estimates recorded to statement of operations
|
—
|
|
|
40
|
|
|
40
|
|
Changes in estimates recorded to balance sheet
|
2,798
|
|
|
—
|
|
|
2,798
|
|
Expenditures
|
(163
|
)
|
|
(629
|
)
|
|
(792
|
)
|
Currency translation and other
|
50
|
|
|
146
|
|
|
196
|
|
Balance at March 31, 2019
|
$
|
41,955
|
|
|
$
|
32,466
|
|
|
$
|
74,421
|
|
All the landfill facilities included in the above were active as of
March 31, 2019
. There were no significant charges (benefits) in
2019
resulting from changes in estimates for closure and post-closure liabilities.
New asset retirement obligations incurred during the first
three
months of
2019
were discounted at the credit-adjusted risk-free rate of
6.02%
.
(10) REMEDIAL LIABILITIES
The changes to remedial liabilities for the
three
months ended
March 31, 2019
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remedial
Liabilities for
Landfill Sites
|
|
Remedial
Liabilities for
Inactive Sites
|
|
Remedial
Liabilities
(Including
Superfund) for
Non-Landfill
Operations
|
|
Total
|
Balance at January 1, 2019
|
$
|
1,838
|
|
|
$
|
65,315
|
|
|
$
|
53,864
|
|
|
$
|
121,017
|
|
Accretion
|
22
|
|
|
675
|
|
|
446
|
|
|
1,143
|
|
Changes in estimates recorded to statement of operations
|
23
|
|
|
172
|
|
|
(1,009
|
)
|
|
(814
|
)
|
Expenditures
|
(15
|
)
|
|
(1,154
|
)
|
|
(1,303
|
)
|
|
(2,472
|
)
|
Currency translation and other
|
—
|
|
|
10
|
|
|
77
|
|
|
87
|
|
Balance at March 31, 2019
|
$
|
1,868
|
|
|
$
|
65,018
|
|
|
$
|
52,075
|
|
|
$
|
118,961
|
|
In the
three
months ended
March 31, 2019
, there were no significant charges (benefits) resulting from changes in estimates for remedial liabilities.
(11) FINANCING ARRANGEMENTS
The following table is a summary of the Company’s financing arrangements (in thousands):
|
|
|
|
|
|
|
|
|
Current Obligations:
|
March 31, 2019
|
|
December 31, 2018
|
Senior secured Term Loan Agreement ("Term Loan Agreement")
|
$
|
7,535
|
|
|
$
|
7,535
|
|
|
|
|
|
Long-Term Obligations:
|
|
|
|
Senior secured Term Loan Agreement due June 30, 2024
|
$
|
732,813
|
|
|
$
|
734,697
|
|
Senior unsecured notes, at 5.125%, due June 1, 2021 ("2021 Notes")
|
845,000
|
|
|
845,000
|
|
Long-term obligations, at par
|
$
|
1,577,813
|
|
|
$
|
1,579,697
|
|
Unamortized debt issuance costs and premium, net
|
(13,808
|
)
|
|
(14,676
|
)
|
Long-term obligations, at carrying value
|
$
|
1,564,005
|
|
|
$
|
1,565,021
|
|
Financing Activities
At
March 31, 2019
and
December 31, 2018
, the fair value of the Term Loan Agreement debt was
$738.5 million
and
$707.0 million
, respectively, based on quoted market prices or other available market data. At
March 31, 2019
and
December 31, 2018
, the fair value of the Company's 2021 Notes was
$846.1 million
and
$845.0 million
, respectively, based on quoted market prices for the instrument. The fair values of the Company's currently outstanding term loans under the Term Loan Agreement (the "Term Loans") and 2021 Notes are considered Level 2 measures according to the fair value hierarchy.
The Company also maintains a
$400.0 million
revolving credit facility under which the Company had
no
outstanding loan balance as of
March 31, 2019
and
December 31, 2018
. At
March 31, 2019
, approximately
$209.1 million
was available to borrow and outstanding letters of credit were
$153.3 million
. At
December 31, 2018
,
$235.4 million
was available to borrow and outstanding letters of credit were
$130.1 million
.
Cash Flow Hedges
The Company’s strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements. Although the interest rate on all
$740.3 million
aggregate principal amount of Term Loans which were outstanding on
March 31, 2019
is variable under the Term Loan Agreement, the Company has effectively fixed the interest rate on
$350.0 million
aggregate principal amount of the Term Loans outstanding by entering into interest rate swap agreements with a notional amount of
$350.0 million
. Under the terms of the interest rate swap agreements, the Company receives interest based on the one-month LIBOR index and pays interest at a weighted average rate of approximately
2.92%
. When combined with the
1.75%
interest rate margin for Eurocurrency borrowings, the effective annual interest rate on such
$350.0 million
aggregate principal amount of Term Loans is therefore approximately
4.67%
.
The Company recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value. No ineffectiveness has been identified on these swaps and, therefore, all unrealized changes in fair value are recorded in accumulated other comprehensive loss. Amounts are reclassified from accumulated other comprehensive loss into interest expense on the statement of operations in the same period or periods during which the hedged transaction affects earnings.
As of
March 31, 2019
and
December 31, 2018
, the Company has recorded a derivative liability with a fair value of
$13.4 million
and
$8.8 million
, respectively, within accrued expenses in connection with these cash flow hedges.
The fair value of the interest rate swaps included in the Level 2 tier of the fair value hierarchy is calculated using discounted cash flow valuation methodologies based upon the one-month LIBOR yield curves that are observable at commonly quoted intervals for the full term of the swaps. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency for similar assets and liabilities.
(12) INCOME TAXES
The Company records a tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. Losses from jurisdictions for which no benefit can be recognized and the income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. The estimated annual effective tax rate may be significantly impacted by projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.
The Company’s effective tax rate for the
three
months ended
March 31, 2019
was
86.0%
compared to
(31.9)%
for the same period in
2018
. The variations in the effective income tax rates for the
three
months ended
March 31, 2019
and
March 31, 2018
, as compared to more customary relationships between pre-tax income and the provision for income taxes, were primarily due to not recognizing income tax benefits from current operating losses related to certain Canadian entities during these periods.
As of
March 31, 2019
and
December 31, 2018
, the Company had recorded
$3.2 million
of liabilities for unrecognized tax benefits and
$0.8 million
of interest.
During the first quarter of 2019 the Company was notified by the Internal Revenue Service (“IRS”) of their intent to examine tax years 2014-2016. The Company does not believe the examination will result in material liabilities.
Due to expiring statute of limitation periods, the Company believes that total unrecognized tax benefits will decrease by
$0.6 million
within the next 12 months.
(13) EARNINGS (LOSS) PER SHARE
The following are computations of basic and diluted earnings (loss) per share (in thousands except for per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2019
|
|
2018
|
Numerator for basic and diluted earnings (loss) per share:
|
|
|
|
|
Net income (loss)
|
|
$
|
976
|
|
|
$
|
(12,631
|
)
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Basic shares outstanding
|
|
55,848
|
|
|
56,457
|
|
Dilutive effect of stock-based compensation awards
|
|
234
|
|
|
—
|
|
Dilutive shares outstanding
|
|
56,082
|
|
|
56,457
|
|
|
|
|
|
|
Basic income (loss) per share:
|
|
$
|
0.02
|
|
|
$
|
(0.22
|
)
|
|
|
|
|
|
|
|
Diluted income (loss) per share:
|
|
$
|
0.02
|
|
|
$
|
(0.22
|
)
|
For the
three
months ended
March 31, 2019
, the dilutive effect of all then outstanding restricted stock and performance awards is included in the earnings per share calculation above except for
78,271
of performance stock awards for which the performance criteria were not attained at that time and
27,357
of restricted stock awards which were antidilutive.
As a result of the net loss reported for the
three
months ended
March 31, 2018
, all then outstanding restricted stock awards and performance awards totaling
896,180
were excluded from the calculation of diluted loss per share as their inclusion would have an antidilutive effect.
(14) ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component and related tax effects for the
three
months ended
March 31, 2019
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation
|
|
Unrealized Losses (Gains) on Available-For-Sale Securities
|
|
Unrealized Losses on Interest Rate Hedge
|
|
Unfunded Pension Liability
|
|
Total
|
Balance at January 1, 2019
|
$
|
(212,925
|
)
|
|
$
|
(69
|
)
|
|
$
|
(8,773
|
)
|
|
$
|
(1,604
|
)
|
|
$
|
(223,371
|
)
|
Other comprehensive income (loss) before tax effects
|
8,540
|
|
|
174
|
|
|
(5,017
|
)
|
|
—
|
|
|
3,697
|
|
Tax impact related to items in other comprehensive income (loss)
|
—
|
|
|
(31
|
)
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
Amounts reclassified out of accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
358
|
|
|
—
|
|
|
358
|
|
Other comprehensive income (loss)
|
8,540
|
|
|
143
|
|
|
(4,659
|
)
|
|
—
|
|
|
4,024
|
|
Balance at March 31, 2019
|
$
|
(204,385
|
)
|
|
$
|
74
|
|
|
$
|
(13,432
|
)
|
|
$
|
(1,604
|
)
|
|
$
|
(219,347
|
)
|
The amounts reclassified out of accumulated other comprehensive loss into the consolidated statement of operations, with presentation location, during the three months ended
March 31, 2019
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
|
|
Other Comprehensive Income (Loss) Components
|
|
|
Location
|
Unrealized loss on interest rate hedge
|
|
$
|
(358
|
)
|
|
Interest expense, net of interest income
|
There were
no
reclassifications out of accumulated other comprehensive loss during the three months ended
March 31, 2018
.
(15) STOCK-BASED COMPENSATION
Total stock-based compensation cost charged to selling, general and administrative expenses for the
three
months ended
March 31, 2019
and
March 31, 2018
was
$5.8 million
and
$3.1 million
, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was
$1.1 million
and
$0.9 million
for the
three
months ended
March 31, 2019
and
March 31, 2018
, respectively.
Restricted Stock Awards
The following information relates to restricted stock awards that have been granted to employees and directors under the Company's equity incentive plan adopted in 2010 (the "2010 Plan"). The restricted stock awards are not transferable until vested and the restrictions generally lapse upon the achievement of continued employment over a
three
-to-
five
-year period or service as a director until the following annual meeting of shareholders. The fair value of each restricted stock grant is based on the closing price of the Company's common stock on the date of grant and is amortized to expense over its vesting period.
The following table summarizes information about restricted stock awards for the
three
months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
Restricted Stock
|
Number of Shares
|
|
Weighted Average
Grant-Date
Fair Value
|
Balance at January 1, 2019
|
657,240
|
|
|
$
|
54.65
|
|
Granted
|
42,300
|
|
|
61.18
|
|
Vested
|
(61,391
|
)
|
|
52.83
|
|
Forfeited
|
(21,870
|
)
|
|
54.39
|
|
Balance at March 31, 2019
|
616,279
|
|
|
54.51
|
|
As of
March 31, 2019
, there was
$23.1 million
of total unrecognized compensation cost arising from restricted stock awards under the Company's 2010 Plan. This cost is expected to be recognized over a weighted average period of
2.6
years. The total fair value of restricted stock vested during the
three
months ended
March 31, 2019
and
March 31, 2018
was
$3.2 million
and
$1.3 million
, respectively.
Performance Stock Awards
The following information relates to performance stock awards that have been granted to employees under the Company's 2010 Plan. Performance stock awards are subject to performance criteria established by the compensation committee of the Company's board of directors prior to or at the date of grant. The vesting of the performance stock awards is based on achieving such targets typically based on revenue, Adjusted EBITDA margin, Adjusted Free Cash Flow and Total Recordable Incident Rate. In addition, performance stock awards include continued service conditions. The fair value of each performance stock award is based on the closing price of the Company's common stock on the date of grant and is amortized to expense over the service period if achievement of performance measures is considered probable.
The following table summarizes information about performance stock awards for the
three
months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
Performance Stock
|
Number of Shares
|
|
Weighted Average
Grant-Date
Fair Value
|
Balance at January 1, 2019
|
213,490
|
|
|
$
|
55.71
|
|
Granted
|
—
|
|
|
—
|
|
Vested
|
(51,996
|
)
|
|
55.77
|
|
Forfeited
|
(14,120
|
)
|
|
55.69
|
|
Balance at March 31, 2019
|
147,374
|
|
|
55.69
|
|
As of
March 31, 2019
, there was
$4.6 million
of total unrecognized compensation cost arising from unvested performance stock awards deemed probable of vesting under the Company's 2010 Plan. The total fair value of performance awards vested during the
three
months ended
March 31, 2019
and
March 31, 2018
was
$2.9 million
and
$0.5 million
, respectively
.
Common Stock Repurchases
The Company's board of directors has authorized the repurchase of up to
$600 million
of the Company's common stock. During the three months ended
March 31, 2019
and
March 31, 2018
, the Company repurchased and retired a total of approximately
0.1 million
and
0.3 million
shares, respectively, of the Company's common stock for total costs of approximately
$6.3 million
and
$14.3 million
, respectively. Through
March 31, 2019
, the Company has repurchased and retired a total of approximately
5.7 million
shares of its common stock for approximately
$300.3 million
under this program. As of
March 31, 2019
, an additional
$299.7 million
remained available for repurchase of shares under this program.
(16) COMMITMENTS AND CONTINGENCIES
Legal and Administrative Proceedings
The Company and its subsidiaries are subject to legal proceedings and claims arising in the ordinary course of business. Actions filed against the Company arise from commercial and employment-related claims including alleged class actions related to sales practices and wage and hour claims. The plaintiffs in these actions may be seeking damages or injunctive relief
or both. These actions are in various jurisdictions and stages of proceedings, and some are covered in part by insurance. In addition, the Company’s waste management services operations are regulated by federal, state, provincial and local laws enacted to regulate discharge of materials into the environment, remediation of contaminated soil and groundwater or otherwise protect the environment. This ongoing regulation results in the Company frequently becoming a party to legal or administrative proceedings involving all levels of governmental authorities and other interested parties. The issues involved in such proceedings generally relate to alleged violations of existing permits and licenses or alleged responsibility under federal or state Superfund laws to remediate contamination at properties owned either by the Company or by other parties (“third-party sites”) to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes.
At
March 31, 2019
and
December 31, 2018
, the Company had recorded reserves of
$23.8 million
and
$25.4 million
, respectively, in the Company's financial statements for actual or probable liabilities related to the legal and administrative proceedings in which the Company was then involved, the principal of which are described below. At
March 31, 2019
and
December 31, 2018
, the Company also believed that it was reasonably possible that the amount of these potential liabilities could be as much as
$1.8 million
more. The Company periodically adjusts the aggregate amount of these reserves when actual or probable liabilities are paid or otherwise discharged, new claims arise or additional relevant information about existing or probable claims becomes available. As of
March 31, 2019
and
December 31, 2018
, the
$23.8 million
and
$25.4 million
, respectively, of reserves consisted of (i)
$17.6 million
and
$17.9 million
, respectively, related to pending legal or administrative proceedings, including Superfund liabilities, which were included in remedial liabilities on the consolidated balance sheets, and (ii)
$6.2 million
and
$7.5
million
, respectively, primarily related to federal, state and provincial enforcement actions, which were included in accrued expenses on the consolidated balance sheets.
As of
March 31, 2019
, the principal legal and administrative proceedings in which the Company was involved, or which had been terminated during
2019
, were as follows:
Ville Mercier.
In September 2002, the Company acquired the stock of a subsidiary (the "Mercier Subsidiary") which owns a hazardous waste incinerator in Ville Mercier, Quebec (the "Mercier Facility"). The property adjacent to the Mercier Facility, which is also owned by the Mercier Subsidiary, is now contaminated as a result of actions dating back to 1968, when the Government of Quebec issued
two
permits to dump organic liquids into lagoons on the property to a company unrelated to the Mercier Subsidiary. In 1999, Ville Mercier and
three
neighboring municipalities filed separate legal proceedings against the Mercier Subsidiary and the Government of Quebec. In 2012, the municipalities amended their existing statement of claim to seek
$2.9 million
(CAD) in general damages and
$10.0 million
(CAD) in punitive damages, plus interest and costs, as well as injunctive relief. Both the Government of Quebec and the Company have filed summary judgment motions against the municipalities. The parties are attempting to negotiate a resolution and hearings on the motions have been delayed. In September 2007, the Quebec Minister of Sustainable Development, Environment and Parks issued a notice pursuant to Section 115.1 of the Environment Quality Act, superseding notices issued in 1992, which are the subject of the pending litigation. The more recent notice notifies the Mercier Subsidiary that, if the Mercier Subsidiary does not take certain remedial measures at the site, the Minister intends to undertake those measures at the site and claim direct and indirect costs related to such measures. The Company has accrued for costs expected to be incurred relative to the resolution of this matter and believes this matter will not have future material effect on its financial position, results of operations or cash flows.
Safety-Kleen Legal Proceedings.
On December 28, 2012, the Company acquired Safety-Kleen, Inc. ("Safety-Kleen") and thereby became subject to the legal proceedings in which Safety-Kleen was a party on that date. In addition to certain Superfund proceedings in which Safety-Kleen has been named as a potentially responsible party as described below under “Superfund Proceedings,” the principal such legal proceedings involving Safety-Kleen which were outstanding as of
March 31, 2019
were as follows:
Product Liability Cases.
Safety-Kleen has been named as a defendant in various lawsuits that are currently pending in various courts and jurisdictions throughout the United States, including approximately
67
proceedings (excluding cases which have been settled but not formally dismissed) as of
March 31, 2019
, wherein persons claim personal injury resulting from the use of Safety-Kleen's parts cleaning equipment or cleaning products. These proceedings typically involve allegations that the solvent used in Safety-Kleen's parts cleaning equipment contains contaminants and/or that Safety-Kleen's recycling process does not effectively remove the contaminants that become entrained in the solvent during their use. In addition, certain claimants assert that Safety-Kleen failed to adequately warn the product user of potential risks, including a historic failure to warn that solvent contains trace amounts of toxic or hazardous substances such as benzene.
Safety-Kleen maintains insurance that it believes will provide coverage for these product liability claims (over amounts accrued for self-insured retentions and deductibles in certain limited cases), except for punitive damages to the extent not insurable under state law or excluded from insurance coverage. Safety-Kleen also believes that these claims lack merit and has historically vigorously defended, and intends to continue to vigorously defend, itself and the safety of its products against all these claims. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, Safety-Kleen is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of
March 31, 2019
. From
January 1, 2019
to
March 31, 2019
,
seven
product liability claims were settled or dismissed. Due to the nature of these claims and the related insurance, the Company did not incur any expense as Safety-Kleen's insurance provided coverage in full for all such claims. Safety-Kleen may be named in similar, additional lawsuits in the future, including claims for which insurance coverage may not be available.
Superfund Proceedings
The Company has been notified that either the Company (which, since December 28, 2012, includes Safety-Kleen) or the prior owners of certain of the Company's facilities for which the Company may have certain indemnification obligations have been identified as potentially responsible parties ("PRPs") or potential PRPs in connection with
128
sites which are subject to or are proposed to become subject to proceedings under federal or state Superfund laws. Of the
128
sites,
five
(including the BR Facility described below) involve facilities that are now owned or leased by the Company and
123
involve third-party sites to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes. Of the
123
third-party sites,
30
are now settled,
16
are currently requiring expenditures on remediation and
77
are not currently requiring expenditures on remediation.
In connection with each site, the Company has estimated the extent, if any, to which it may be subject, either directly or as a result of any indemnification obligations, for cleanup and remediation costs, related legal and consulting costs associated with PRP
investigations, settlements and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability, if any, of the Company or the prior owners of certain of the Company's facilities to contribute a portion of the cleanup costs, the assumptions that must be made in calculating the estimated cost and timing of remediation, the identification of other PRPs and their respective capability and obligation to contribute to remediation efforts, and the existence and legal standing of indemnification agreements, if any, with prior owners, which may either benefit the Company or subject the Company to potential indemnification obligations. The Company believes its potential liability could exceed
$100,000
at
ten
of the
123
third-party sites.
BR Facility.
The Company acquired in 2002 a former hazardous waste incinerator and landfill in Baton Rouge (the "BR Facility"), for which operations had been previously discontinued by the prior owner. In September 2007, the U.S. Environmental Protection Agency ("the EPA")" issued a special notice letter to the Company related to the Devil's Swamp Lake Site ("Devil's Swamp") in East Baton Rouge Parish, Louisiana. Devil's Swamp includes a lake located downstream of an outfall ditch where wastewater and storm water have been discharged, and Devil's Swamp is proposed to be included on the National Priorities List due to the presence of Contaminants of Concern ("COC") cited by the EPA. These COCs include substances of the kind found in wastewater and storm water discharged from the BR Facility in past operations. The EPA originally requested COC generators to submit a good faith offer to conduct a remedial investigation feasibility study directed towards the eventual remediation of the site. In 2018 the Company completed performing corrective actions at the BR Facility under an order issued by the Louisiana Department of Environmental Quality, and has also completed conducting the remedial investigation and feasibility study for Devil's Swamp under an order issued by the EPA. The Company cannot presently estimate the potential additional liability for the Devil's Swamp cleanup until a final remedy is selected by the EPA with issuance of a Record of Decision.
Third-Party Sites.
Of the
123
third-party sites at which the Company has been notified it is a PRP or potential PRP or may have indemnification obligations, Clean Harbors has an indemnification agreement at
11
of these sites with ChemWaste, a former subsidiary of Waste Management, Inc., and at
six
additional of these third-party sites, Safety-Kleen has a similar indemnification agreement with McKesson Corporation. These agreements indemnify the Company (which now includes Safety-Kleen) with respect to any liability at the
17
sites for waste disposed prior to the Company's (or Safety-Kleen's) acquisition of the former subsidiaries of Waste Management and McKesson which had shipped wastes to those sites. Accordingly, Waste Management or McKesson are paying all costs of defending those subsidiaries in those
17
cases, including legal fees and settlement costs. However, there can be no guarantee that the Company's ultimate liabilities for those sites will not exceed the amount recorded or that indemnities applicable to any of these sites will be available to pay all or a portion of related costs. Except for the indemnification agreements which the Company holds from ChemWaste, McKesson and two other entities, the Company does not have an indemnity agreement with respect to any of the
123
third-party sites discussed above.
Federal, State and Provincial Enforcement Actions
From time to time, the Company pays fines or penalties in regulatory proceedings relating primarily to waste treatment, storage or disposal facilities. As of
March 31, 2019
and
December 31, 2018
, there were
11
and
ten
proceedings, respectively, for which the Company reasonably believes that the sanctions could equal or exceed
$100,000
. The Company believes that the fines or other penalties in these or any of the other regulatory proceedings will, individually or in the aggregate, not have a material effect on its financial condition, results of operations or cash flows.
(17) LEASES
As of
March 31, 2019
, the Company’s leases were all operating leases except for a single finance lease related to the Company’s corporate headquarters, which was amended during the first quarter of 2019, resulting in the classification as a finance lease.
The Company’s lease expense was as follows (in thousands):
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
Operating lease cost
|
$
|
13,362
|
|
Finance lease cost
|
|
Amortization of ROU asset
|
245
|
|
Interest on lease liability
|
321
|
|
Total finance lease cost
|
566
|
|
Short-term lease cost
|
19,714
|
|
Variable lease cost
|
1,242
|
|
Total lease cost
|
$
|
34,884
|
|
Other information related to leases was as follows (in thousands, except lease term and discount rate):
|
|
|
|
|
Supplemental Lease Balance Sheet Information:
|
March 31, 2019
|
ROU assets
|
|
Operating leases
|
$
|
170,550
|
|
Finance lease (included in property, plant and equipment, net)
|
22,782
|
|
Current portion of lease liabilities
|
|
Operating leases
|
43,858
|
|
Finance lease (included in accrued expenses)
|
413
|
|
Long-term portion of lease liabilities
|
|
Operating leases
|
128,689
|
|
Finance lease (included in deferred taxes, unrecognized tax benefits and other long-term liabilities)
|
23,797
|
|
|
|
|
|
Weighted Average Remaining Lease Term (years)
|
March 31, 2019
|
Operating leases
|
5.3
|
|
Finance lease
|
23.3
|
|
Weighted Average Discount Rate
|
|
Operating leases
|
5.42
|
%
|
Finance lease
|
5.25
|
%
|
At
March 31, 2019
, our future lease payments under non-cancelable leases that have lease terms in excess of one year were as follows (in thousands):
|
|
|
|
|
|
|
|
|
Years Ending December 31,
|
Operating
Leases
|
|
Finance
Lease
|
2019 (nine months)
|
$
|
40,019
|
|
|
$
|
1,307
|
|
2020
|
44,558
|
|
|
1,777
|
|
2021
|
33,147
|
|
|
1,813
|
|
2022
|
26,081
|
|
|
1,849
|
|
2023
|
18,498
|
|
|
1,886
|
|
2024
|
12,525
|
|
|
1,923
|
|
Thereafter
|
26,037
|
|
|
40,636
|
|
Total future lease payments
|
200,865
|
|
|
51,191
|
|
Amount representing interest
|
(28,318
|
)
|
|
(26,981
|
)
|
Total lease liabilities
|
$
|
172,547
|
|
|
$
|
24,210
|
|
At
March 31, 2019
, none of our executed leases that had not yet commenced will create significant rights or obligations in the future and our sublease transactions are not material. Additionally, the Company does not have any related party leases and there were no restrictions or covenants imposed by its leases.
Disclosures related to periods prior to adoption of Topic 842
The following is a summary of future minimum payments under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at December 31, 2018 (in thousands):
|
|
|
|
|
Year
|
Total
Operating
Leases
|
2019
|
$
|
56,480
|
|
2020
|
45,467
|
|
2021
|
33,564
|
|
2022
|
24,509
|
|
2023
|
15,253
|
|
Thereafter
|
35,778
|
|
Total minimum lease payments
|
$
|
211,051
|
|
During the years ended December 31, 2018, 2017 and 2016, rent expense including short-term rentals was approximately
$141.1 million
,
$125.4 million
, and
$121.9 million
, respectively.
(18) SEGMENT REPORTING
Segment reporting is prepared on the same basis that the Company's chief executive officer, who is the Company's chief operating decision maker, manages the business, makes operating decisions and assesses performance. The Company's operations are managed in
two
operating segments: Environmental Services and Safety-Kleen.
Third-party revenue is revenue billed to outside customers by a particular segment. Direct revenue is revenue allocated to the segment providing the product or service. Intersegment revenues represent the sharing of third-party revenues among the segments based on products and services provided by each segment as if the products and services were sold directly to the third-party. The intersegment revenues are shown net. The operations not managed through the Company’s operating segments described above are recorded as “Corporate Items.”
The following table reconciles third-party revenues to direct revenues for the
three
months ended
March 31, 2019
and
March 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
|
For the Three Months Ended March 31, 2018
|
|
Third-party revenues
|
|
Intersegment revenues, net
|
|
Corporate Items, net
|
|
Direct revenues
|
|
Third-party revenues
|
|
Intersegment revenues, net
|
|
Corporate Items, net
|
|
Direct revenues
|
Environmental Services
|
$
|
473,698
|
|
|
$
|
34,075
|
|
|
$
|
1,249
|
|
|
$
|
509,022
|
|
|
$
|
439,688
|
|
|
$
|
31,965
|
|
|
$
|
794
|
|
|
$
|
472,447
|
|
Safety-Kleen
|
306,547
|
|
|
(34,075
|
)
|
|
5
|
|
|
272,477
|
|
|
309,918
|
|
|
(31,965
|
)
|
|
11
|
|
|
277,964
|
|
Corporate Items
|
594
|
|
|
—
|
|
|
(1,254
|
)
|
|
(660
|
)
|
|
172
|
|
|
—
|
|
|
(805
|
)
|
|
(633
|
)
|
Total
|
$
|
780,839
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
780,839
|
|
|
$
|
749,778
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
749,778
|
|
The primary financial measure by which the Company evaluates the performance of its segments is "Adjusted EBITDA," which consists of net income (loss) plus accretion of environmental liabilities, depreciation and amortization, interest expense, net of interest income, provision for income taxes and other gains or non-cash charges not deemed representative of fundamental segment results and excludes other (income) expense, net. Transactions between the segments are accounted for at the Company’s best estimate based on similar transactions with outside customers.
The following table presents Adjusted EBITDA information used by management by reported segment (in thousands):
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
March 31,
|
|
2019
|
|
2018
|
Adjusted EBITDA:
|
|
|
|
|
|
Environmental Services
|
$
|
89,510
|
|
|
$
|
61,417
|
|
Safety-Kleen
|
54,793
|
|
|
61,884
|
|
Corporate Items
|
(42,640
|
)
|
|
(35,036
|
)
|
Total
|
101,663
|
|
|
88,265
|
|
Reconciliation to Consolidated Statements of Operations:
|
|
|
|
|
|
Accretion of environmental liabilities
|
2,574
|
|
|
2,430
|
|
Depreciation and amortization
|
75,355
|
|
|
74,844
|
|
Income from operations
|
23,734
|
|
|
10,991
|
|
Other (income) expense, net
|
(2,983
|
)
|
|
299
|
|
Interest expense, net of interest income
|
19,764
|
|
|
20,270
|
|
Income (loss) before provision for income taxes
|
$
|
6,953
|
|
|
$
|
(9,578
|
)
|
The following table presents certain assets by reportable segment and in the aggregate (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Property, plant and equipment, net
|
|
|
|
Environmental Services
|
$
|
953,960
|
|
|
$
|
951,867
|
|
Safety-Kleen
|
561,041
|
|
|
553,220
|
|
Corporate Items
|
73,612
|
|
|
56,891
|
|
Total property, plant and equipment, net
|
$
|
1,588,613
|
|
|
$
|
1,561,978
|
|
|
|
|
|
Goodwill and Permits and other intangibles, net
|
|
|
|
Environmental Services
|
|
|
|
Goodwill
|
$
|
204,860
|
|
|
$
|
207,019
|
|
Permits and other intangibles, net
|
95,040
|
|
|
93,313
|
|
Total Environmental Services
|
299,900
|
|
|
300,332
|
|
|
|
|
|
Safety-Kleen
|
|
|
|
Goodwill
|
$
|
313,050
|
|
|
$
|
307,170
|
|
Permits and other intangibles, net
|
343,918
|
|
|
348,562
|
|
Total Safety-Kleen
|
656,968
|
|
|
655,732
|
|
|
|
|
|
Total
|
$
|
956,868
|
|
|
$
|
956,064
|
|
The following table presents the total assets by reportable segment (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Environmental Services
|
$
|
1,724,208
|
|
|
$
|
1,640,706
|
|
Safety-Kleen
|
1,518,723
|
|
|
1,431,381
|
|
Corporate Items
|
639,123
|
|
|
666,234
|
|
Total
|
$
|
3,882,054
|
|
|
$
|
3,738,321
|
|
The following table presents the total assets by geographical area (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
United States
|
$
|
3,212,979
|
|
|
$
|
3,090,311
|
|
Canada
|
669,075
|
|
|
648,010
|
|
Total
|
$
|
3,882,054
|
|
|
$
|
3,738,321
|
|
(19) GUARANTOR AND NON-GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION
The 2021 Notes and the Company's obligations under its Term Loan Agreement are guaranteed by substantially all of the Company’s subsidiaries organized in the United States. Each guarantor is a
100%
owned subsidiary of Clean Harbors, Inc. and its guarantee is both full and unconditional and joint and several. The guarantees are, however, subject to customary release provisions under which the guarantee of any domestic restricted subsidiary will be released if the Company sells such subsidiary to an unrelated third party in accordance with the terms of the indentures which govern the 2021 Notes and of the Term Loan Agreement. The 2021 Notes and the Company's obligations under its Term Loan Agreement are not guaranteed by the Company’s subsidiaries organized outside the United States. The following supplemental condensed consolidating financial information for the parent company, the guarantor subsidiaries and the non-guarantor subsidiaries, respectively, is presented in conformity with the requirements of Rule 3-10 of SEC Regulation S-X (“Rule 3-10”).
Following is the condensed consolidating balance sheet at
March 31, 2019
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean
Harbors, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
27,431
|
|
|
$
|
75,099
|
|
|
$
|
64,841
|
|
|
$
|
—
|
|
|
$
|
167,371
|
|
Short-term marketable securities
|
121
|
|
|
—
|
|
|
57,356
|
|
|
—
|
|
|
57,477
|
|
Intercompany receivables
|
268,195
|
|
|
701,583
|
|
|
58,138
|
|
|
(1,027,916
|
)
|
|
—
|
|
Accounts receivable, net
|
—
|
|
|
526,047
|
|
|
87,460
|
|
|
—
|
|
|
613,507
|
|
Other current assets
|
—
|
|
|
281,802
|
|
|
44,525
|
|
|
(16,560
|
)
|
|
309,767
|
|
Property, plant and equipment, net
|
—
|
|
|
1,261,206
|
|
|
327,407
|
|
|
—
|
|
|
1,588,613
|
|
Investments in subsidiaries
|
3,176,613
|
|
|
566,296
|
|
|
—
|
|
|
(3,742,909
|
)
|
|
—
|
|
Intercompany debt receivable
|
—
|
|
|
14,900
|
|
|
21,000
|
|
|
(35,900
|
)
|
|
—
|
|
Operating lease right-of-use assets
|
—
|
|
|
137,591
|
|
|
32,959
|
|
|
—
|
|
|
170,550
|
|
Goodwill
|
—
|
|
|
459,139
|
|
|
58,771
|
|
|
—
|
|
|
517,910
|
|
Permits and other intangibles, net
|
—
|
|
|
390,838
|
|
|
48,120
|
|
|
—
|
|
|
438,958
|
|
Other long-term assets
|
1,437
|
|
|
13,530
|
|
|
2,903
|
|
|
31
|
|
|
17,901
|
|
Total assets
|
$
|
3,473,797
|
|
|
$
|
4,428,031
|
|
|
$
|
803,480
|
|
|
$
|
(4,823,254
|
)
|
|
$
|
3,882,054
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
35,686
|
|
|
$
|
431,891
|
|
|
$
|
146,493
|
|
|
$
|
(16,560
|
)
|
|
$
|
597,510
|
|
Intercompany payables
|
702,141
|
|
|
325,025
|
|
|
750
|
|
|
(1,027,916
|
)
|
|
—
|
|
Closure, post-closure and remedial liabilities, net
|
—
|
|
|
147,944
|
|
|
17,524
|
|
|
—
|
|
|
165,468
|
|
Long-term obligations, net
|
1,564,005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,564,005
|
|
Operating lease liabilities, less current portion
|
—
|
|
|
104,374
|
|
|
24,315
|
|
|
—
|
|
|
128,689
|
|
Intercompany debt payable
|
—
|
|
|
21,000
|
|
|
14,900
|
|
|
(35,900
|
)
|
|
—
|
|
Other long-term liabilities
|
—
|
|
|
233,979
|
|
|
20,407
|
|
|
31
|
|
|
254,417
|
|
Total liabilities
|
2,301,832
|
|
|
1,264,213
|
|
|
224,389
|
|
|
(1,080,345
|
)
|
|
2,710,089
|
|
Stockholders’ equity
|
1,171,965
|
|
|
3,163,818
|
|
|
579,091
|
|
|
(3,742,909
|
)
|
|
1,171,965
|
|
Total liabilities and stockholders’ equity
|
$
|
3,473,797
|
|
|
$
|
4,428,031
|
|
|
$
|
803,480
|
|
|
$
|
(4,823,254
|
)
|
|
$
|
3,882,054
|
|
Following is the condensed consolidating balance sheet at
December 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean
Harbors, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
27,308
|
|
|
$
|
101,302
|
|
|
$
|
97,897
|
|
|
$
|
—
|
|
|
$
|
226,507
|
|
Short-term marketable securities
|
67
|
|
|
—
|
|
|
52,789
|
|
|
—
|
|
|
52,856
|
|
Intercompany receivables
|
262,475
|
|
|
721,521
|
|
|
60,693
|
|
|
(1,044,689
|
)
|
|
—
|
|
Accounts receivable, net
|
—
|
|
|
520,785
|
|
|
86,167
|
|
|
—
|
|
|
606,952
|
|
Other current assets
|
—
|
|
|
289,869
|
|
|
49,631
|
|
|
(23,657
|
)
|
|
315,843
|
|
Property, plant and equipment, net
|
—
|
|
|
1,233,578
|
|
|
328,400
|
|
|
—
|
|
|
1,561,978
|
|
Investments in subsidiaries
|
3,162,704
|
|
|
571,304
|
|
|
—
|
|
|
(3,734,008
|
)
|
|
—
|
|
Intercompany debt receivable
|
—
|
|
|
14,669
|
|
|
21,000
|
|
|
(35,669
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
456,307
|
|
|
57,882
|
|
|
—
|
|
|
514,189
|
|
Permits and other intangibles, net
|
—
|
|
|
393,045
|
|
|
48,830
|
|
|
—
|
|
|
441,875
|
|
Other long-term assets
|
1,551
|
|
|
13,545
|
|
|
3,025
|
|
|
—
|
|
|
18,121
|
|
Total assets
|
$
|
3,454,105
|
|
|
$
|
4,315,925
|
|
|
$
|
806,314
|
|
|
$
|
(4,838,023
|
)
|
|
$
|
3,738,321
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
20,170
|
|
|
$
|
457,164
|
|
|
$
|
148,601
|
|
|
$
|
(23,657
|
)
|
|
$
|
602,278
|
|
Intercompany payables
|
699,158
|
|
|
321,846
|
|
|
23,685
|
|
|
(1,044,689
|
)
|
|
—
|
|
Closure, post-closure and remedial liabilities, net
|
—
|
|
|
151,480
|
|
|
16,434
|
|
|
—
|
|
|
167,914
|
|
Long-term obligations, net
|
1,565,021
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,565,021
|
|
Intercompany debt payable
|
—
|
|
|
21,000
|
|
|
14,669
|
|
|
(35,669
|
)
|
|
—
|
|
Other long-term liabilities
|
—
|
|
|
212,924
|
|
|
20,428
|
|
|
—
|
|
|
233,352
|
|
Total liabilities
|
2,284,349
|
|
|
1,164,414
|
|
|
223,817
|
|
|
(1,104,015
|
)
|
|
2,568,565
|
|
Stockholders’ equity
|
1,169,756
|
|
|
3,151,511
|
|
|
582,497
|
|
|
(3,734,008
|
)
|
|
1,169,756
|
|
Total liabilities and stockholders’ equity
|
$
|
3,454,105
|
|
|
$
|
4,315,925
|
|
|
$
|
806,314
|
|
|
$
|
(4,838,023
|
)
|
|
$
|
3,738,321
|
|
Following is the consolidating statement of operations for the
three
months ended
March 31, 2019
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean
Harbors, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Service revenues
|
$
|
—
|
|
|
$
|
529,656
|
|
|
$
|
144,139
|
|
|
$
|
(17,137
|
)
|
|
$
|
656,658
|
|
Product revenues
|
—
|
|
|
115,038
|
|
|
12,384
|
|
|
(3,241
|
)
|
|
124,181
|
|
Total revenues
|
—
|
|
|
644,694
|
|
|
156,523
|
|
|
(20,378
|
)
|
|
780,839
|
|
Cost of revenues (exclusive of items shown separately below)
|
|
|
|
|
|
|
|
|
|
|
Service cost of revenues
|
—
|
|
|
356,590
|
|
|
124,030
|
|
|
(17,137
|
)
|
|
463,483
|
|
Product cost of revenues
|
—
|
|
|
99,357
|
|
|
4,765
|
|
|
(3,241
|
)
|
|
100,881
|
|
Total cost of revenues
|
—
|
|
|
455,947
|
|
|
128,795
|
|
|
(20,378
|
)
|
|
564,364
|
|
Selling, general and administrative expenses
|
57
|
|
|
93,526
|
|
|
21,229
|
|
|
—
|
|
|
114,812
|
|
Accretion of environmental liabilities
|
—
|
|
|
2,267
|
|
|
307
|
|
|
—
|
|
|
2,574
|
|
Depreciation and amortization
|
—
|
|
|
57,335
|
|
|
18,020
|
|
|
—
|
|
|
75,355
|
|
(Loss) income from operations
|
(57
|
)
|
|
35,619
|
|
|
(11,828
|
)
|
|
—
|
|
|
23,734
|
|
Other income (expense), net
|
50
|
|
|
2,962
|
|
|
(29
|
)
|
|
—
|
|
|
2,983
|
|
Interest (expense) income, net
|
(20,374
|
)
|
|
9
|
|
|
601
|
|
|
—
|
|
|
(19,764
|
)
|
Equity in earnings of subsidiaries, net of taxes
|
15,636
|
|
|
(13,336
|
)
|
|
—
|
|
|
(2,300
|
)
|
|
—
|
|
Intercompany interest income (expense)
|
—
|
|
|
197
|
|
|
(197
|
)
|
|
—
|
|
|
—
|
|
(Loss) income before (benefit) provision for income taxes
|
(4,745
|
)
|
|
25,451
|
|
|
(11,453
|
)
|
|
(2,300
|
)
|
|
6,953
|
|
(Benefit) provision for income taxes
|
(5,721
|
)
|
|
11,418
|
|
|
280
|
|
|
—
|
|
|
5,977
|
|
Net income (loss)
|
976
|
|
|
14,033
|
|
|
(11,733
|
)
|
|
(2,300
|
)
|
|
976
|
|
Other comprehensive income
|
4,024
|
|
|
4,024
|
|
|
8,328
|
|
|
(12,352
|
)
|
|
4,024
|
|
Comprehensive income (loss)
|
$
|
5,000
|
|
|
$
|
18,057
|
|
|
$
|
(3,405
|
)
|
|
$
|
(14,652
|
)
|
|
$
|
5,000
|
|
Following is the consolidating statement of operations for the
three
months ended
March 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean
Harbors, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
Service revenues
|
$
|
—
|
|
|
$
|
481,483
|
|
|
$
|
152,401
|
|
|
$
|
(14,165
|
)
|
|
$
|
619,719
|
|
Product revenues
|
—
|
|
|
121,582
|
|
|
11,450
|
|
|
(2,973
|
)
|
|
130,059
|
|
Total revenues
|
—
|
|
|
603,065
|
|
|
163,851
|
|
|
(17,138
|
)
|
|
749,778
|
|
Cost of revenues (exclusive of items shown separately below)
|
|
|
|
|
|
|
|
|
|
Service cost of revenues
|
—
|
|
|
328,180
|
|
|
133,634
|
|
|
(14,165
|
)
|
|
447,649
|
|
Product cost of revenues
|
—
|
|
|
95,038
|
|
|
6,711
|
|
|
(2,973
|
)
|
|
98,776
|
|
Total cost of revenues
|
—
|
|
|
423,218
|
|
|
140,345
|
|
|
(17,138
|
)
|
|
546,425
|
|
Selling, general and administrative expenses
|
35
|
|
|
93,843
|
|
|
21,210
|
|
|
—
|
|
|
115,088
|
|
Accretion of environmental liabilities
|
—
|
|
|
2,176
|
|
|
254
|
|
|
—
|
|
|
2,430
|
|
Depreciation and amortization
|
—
|
|
|
53,704
|
|
|
21,140
|
|
|
—
|
|
|
74,844
|
|
(Loss) income from operations
|
(35
|
)
|
|
30,124
|
|
|
(19,098
|
)
|
|
—
|
|
|
10,991
|
|
Other expense, net
|
—
|
|
|
(85
|
)
|
|
(214
|
)
|
|
—
|
|
|
(299
|
)
|
Interest (expense) income, net
|
(20,999
|
)
|
|
505
|
|
|
224
|
|
|
—
|
|
|
(20,270
|
)
|
Equity in earnings of subsidiaries, net of taxes
|
2,514
|
|
|
(20,062
|
)
|
|
—
|
|
|
17,548
|
|
|
—
|
|
Intercompany interest income (expense)
|
—
|
|
|
1,361
|
|
|
(1,361
|
)
|
|
—
|
|
|
—
|
|
(Loss) income before (benefit) provision for income taxes
|
(18,520
|
)
|
|
11,843
|
|
|
(20,449
|
)
|
|
17,548
|
|
|
(9,578
|
)
|
(Benefit) provision for income taxes
|
(5,889
|
)
|
|
9,101
|
|
|
(159
|
)
|
|
—
|
|
|
3,053
|
|
Net (loss) income
|
(12,631
|
)
|
|
2,742
|
|
|
(20,290
|
)
|
|
17,548
|
|
|
(12,631
|
)
|
Other comprehensive loss
|
(16,746
|
)
|
|
(16,746
|
)
|
|
(14,007
|
)
|
|
30,753
|
|
|
(16,746
|
)
|
Comprehensive loss
|
$
|
(29,377
|
)
|
|
$
|
(14,004
|
)
|
|
$
|
(34,297
|
)
|
|
$
|
48,301
|
|
|
$
|
(29,377
|
)
|
Following is the condensed consolidating statement of cash flows for the
three
months ended
March 31, 2019
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean
Harbors, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating Adjustments
|
|
Total
|
Net cash from operating activities
|
$
|
123
|
|
|
$
|
50,344
|
|
|
$
|
(20,727
|
)
|
|
$
|
—
|
|
|
$
|
29,740
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
—
|
|
|
(48,696
|
)
|
|
(10,251
|
)
|
|
—
|
|
|
(58,947
|
)
|
Proceeds from sale and disposal of fixed assets
|
—
|
|
|
3,366
|
|
|
955
|
|
|
—
|
|
|
4,321
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
(14,870
|
)
|
|
—
|
|
|
—
|
|
|
(14,870
|
)
|
Additions to intangible assets including costs to obtain or renew permits
|
—
|
|
|
(1,294
|
)
|
|
162
|
|
|
—
|
|
|
(1,132
|
)
|
Proceeds from sale of available-for-sale securities
|
—
|
|
|
—
|
|
|
8,600
|
|
|
—
|
|
|
8,600
|
|
Purchases of available-for-sale securities
|
—
|
|
|
—
|
|
|
(12,941
|
)
|
|
—
|
|
|
(12,941
|
)
|
Intercompany
|
—
|
|
|
(10,484
|
)
|
|
—
|
|
|
10,484
|
|
|
—
|
|
Net cash used in investing activities
|
—
|
|
|
(71,978
|
)
|
|
(13,475
|
)
|
|
10,484
|
|
|
(74,969
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in uncashed checks
|
—
|
|
|
(4,454
|
)
|
|
(315
|
)
|
|
—
|
|
|
(4,769
|
)
|
Tax payments related to withholdings on vested restricted stock
|
(2,276
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,276
|
)
|
Repurchases of common stock
|
(6,324
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,324
|
)
|
Payments on finance lease
|
—
|
|
|
(115
|
)
|
|
—
|
|
|
—
|
|
|
(115
|
)
|
Principal payment on debt
|
(1,884
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,884
|
)
|
Intercompany
|
10,484
|
|
|
—
|
|
|
—
|
|
|
(10,484
|
)
|
|
—
|
|
Net cash used in financing activities
|
—
|
|
|
(4,569
|
)
|
|
(315
|
)
|
|
(10,484
|
)
|
|
(15,368
|
)
|
Effect of exchange rate change on cash
|
—
|
|
|
—
|
|
|
1,461
|
|
|
—
|
|
|
1,461
|
|
Increase (decrease) in cash and cash equivalents
|
123
|
|
|
(26,203
|
)
|
|
(33,056
|
)
|
|
—
|
|
|
(59,136
|
)
|
Cash and cash equivalents, beginning of period
|
27,308
|
|
|
101,302
|
|
|
97,897
|
|
|
—
|
|
|
226,507
|
|
Cash and cash equivalents, end of period
|
$
|
27,431
|
|
|
$
|
75,099
|
|
|
$
|
64,841
|
|
|
$
|
—
|
|
|
$
|
167,371
|
|
Following is the condensed consolidating statement of cash flows for the
three
months ended
March 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean
Harbors, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating Adjustments
|
|
Total
|
Net cash from (used in) operating activities
|
$
|
143
|
|
|
$
|
69,536
|
|
|
$
|
(17,776
|
)
|
|
$
|
—
|
|
|
$
|
51,903
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
—
|
|
|
(37,319
|
)
|
|
(6,923
|
)
|
|
—
|
|
|
(44,242
|
)
|
Proceeds from sale and disposal of fixed assets
|
—
|
|
|
292
|
|
|
506
|
|
|
—
|
|
|
798
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
(120,000
|
)
|
|
—
|
|
|
—
|
|
|
(120,000
|
)
|
Additions to intangible assets including costs to obtain or renew permits
|
—
|
|
|
(1,234
|
)
|
|
(11
|
)
|
|
—
|
|
|
(1,245
|
)
|
Proceeds from sale of available-for-sale securities
|
—
|
|
|
—
|
|
|
3,264
|
|
|
—
|
|
|
3,264
|
|
Purchases of available-for-sale securities
|
—
|
|
|
—
|
|
|
(3,003
|
)
|
|
—
|
|
|
(3,003
|
)
|
Intercompany
|
—
|
|
|
(15,812
|
)
|
|
—
|
|
|
15,812
|
|
|
—
|
|
Net cash used in investing activities
|
—
|
|
|
(174,073
|
)
|
|
(6,167
|
)
|
|
15,812
|
|
|
(164,428
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in uncashed checks
|
—
|
|
|
(3,578
|
)
|
|
(265
|
)
|
|
—
|
|
|
(3,843
|
)
|
Tax payments related to withholdings on vested restricted stock
|
(548
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(548
|
)
|
Repurchases of common stock
|
(14,264
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14,264
|
)
|
Principal payment on debt
|
(1,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,000
|
)
|
Intercompany
|
15,812
|
|
|
—
|
|
|
—
|
|
|
(15,812
|
)
|
|
—
|
|
Net cash used in financing activities
|
—
|
|
|
(3,578
|
)
|
|
(265
|
)
|
|
(15,812
|
)
|
|
(19,655
|
)
|
Effect of exchange rate change on cash
|
—
|
|
|
—
|
|
|
(867
|
)
|
|
—
|
|
|
(867
|
)
|
Increase (decrease) in cash and cash equivalents
|
143
|
|
|
(108,115
|
)
|
|
(25,075
|
)
|
|
—
|
|
|
(133,047
|
)
|
Cash and cash equivalents, beginning of period
|
51,638
|
|
|
207,777
|
|
|
59,984
|
|
|
—
|
|
|
319,399
|
|
Cash and cash equivalents, end of period
|
$
|
51,781
|
|
|
$
|
99,662
|
|
|
$
|
34,909
|
|
|
$
|
—
|
|
|
$
|
186,352
|
|