CLH-2012.12.31-10K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________________________________________
FORM 10-K
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                to                                 .
COMMISSION FILE NO. 001-34223
___________________________________________________________________________________________________________
CLEAN HARBORS, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________________________
Massachusetts
(State or other jurisdiction
of incorporation or organization)
 
04-2997780
(IRS Employer Identification No.)
42 Longwater Drive, Norwell, MA
(Address of principal executive offices)
 
02061-9149
(Zip Code)
Registrant's telephone number: (781) 792-5000
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class:
 
Name of each exchange on which registered:
Common Stock, $.01 par value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes S    No £
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  £    No S
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes S    No  £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S    No  £
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer S
 
Accelerated filer £
 
Non-accelerated filer £
(Do not check if a smaller reporting company)
 
Smaller reporting company £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £    No S
On June 29, 2012 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the voting and non-voting common stock of the registrant held by non-affiliates of the registrant was approximately $2.7 billion, based on the closing price of such common stock as of that date on the New York Stock Exchange. Reference is made to Part III of this report for the assumptions on which this calculation is based.
On March 1, 2013, there were outstanding 60,482,056 shares of Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive proxy statement for its 2013 annual meeting of stockholders (which will be filed with the Commission not later than April 30, 2013) are incorporated by reference into Part III of this report.


Table Of Contents

CLEAN HARBORS, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2012
TABLE OF CONTENTS
 
 
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Disclosure Regarding Forward-Looking Statements
In addition to historical information, this annual report contains forward-looking statements, which are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans to," "estimates," "projects," or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report under Item 1A, "Risk Factors." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should also carefully review the risk factors described in other documents which we file from time to time with the Securities and Exchange Commission (the "SEC"), including the quarterly reports on Form 10-Q to be filed by us during 2013.
PART I
ITEM 1.    BUSINESS
General
Clean Harbors, Inc. and its subsidiaries (collectively, "we," "Clean Harbors" or the "Company") is a leading provider of environmental, energy and industrial services throughout North America.
During 2012, we reported our business in four reportable segments, consisting of:
Technical Services—provides a broad range of hazardous material management services including the packaging, collection, transportation, treatment and disposal of hazardous and non-hazardous waste at Company-owned incineration, landfill, wastewater, and other treatment facilities.
Field Services—provides a wide variety of environmental cleanup services on customer sites or other locations on a scheduled or emergency response basis including tank cleaning, decontamination, remediation, and spill cleanup.
Industrial Services—provides industrial and specialty services, such as high-pressure and chemical cleaning, catalyst handling, decoking, material processing, and industrial lodging services to refineries, chemical plants, oil sands facilities, pulp and paper mills, and other industrial facilities.
Oil and Gas Field Services—provides fluid handling, fluid hauling, production servicing, surface rentals, seismic services, and directional boring services to the energy sector serving oil and gas exploration, production, and power generation.
Technical Services and Field Services are included as part of Clean Harbors Environmental Services, and Industrial Services and Oil and Gas Field Services are included as part of Clean Harbors Energy and Industrial Services.
During the quarter ended March 31, 2012, we re-assigned certain departments among our Technical Services, Field Services, Industrial Services and Oil and Gas Field Services segments to support management reporting changes. Accordingly, we re-allocated shared departmental costs among our segments.
Clean Harbors, Inc. was incorporated in Massachusetts in 1980 and our principal office is located in Norwell, Massachusetts. We maintain a website at the following Internet address: http://www.cleanharbors.com. Through a link on this website to the SEC website, http://www.sec.gov, we provide free access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronic filing with the SEC. Our guidelines on corporate governance, the charters for our Board Committees, and our code of ethics for members of the Board of Directors, senior officers and our chief executive officer are also available on our website, and we will post on our website any waivers of, or amendments to, such code of ethics. Our website and the information contained therein or connected thereto are not incorporated by reference into this annual report.
Acquisition of Safety-Kleen
On December 28, 2012, we acquired 100% of the outstanding common shares of Safety-Kleen, Inc. for approximately $1.3 billion. The purchase price consisted of an all-cash purchase price of $1.25 billion, plus a $7.3 million adjustment for the amount by which the estimated net working capital (excluding cash) of Safety-Kleen, Inc. and its subsidiaries (collectively, "Safety-Kleen") on the closing date exceeded $50.0 million. The purchase price is subject to adjustment upon finalization of Safety-Kleen's net working capital balance (excluding cash) as of the closing date. We financed the purchase through a

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combination of approximately $300.0 million of existing cash, $369.5 million in net proceeds from our public offering of 6.9 million shares of our common stock, and approximately $589.0 million in net proceeds from our private debt offering of $600.0 million of 5.125% senior unsecured notes due 2021.
Safety-Kleen, headquartered in Richardson, Texas, is the largest re-refiner and recycler of used oil in North America and a leading provider of parts cleaning and environmental services to commercial, industrial and automotive customers. In conjunction with the transaction, Safety-Kleen, Inc. and its subsidiaries became wholly-owned subsidiaries of Clean Harbors.
We believe Safety-Kleen is a good strategic fit, enabling us to (i) penetrate the small quantity waste generator market, (ii) broaden our waste treatment capabilities to include re-refining waste oil and expanded recycling capabilities, (iii) drive a substantial increase in waste volumes into our existing waste disposal treatment network, (iv) capitalize on the growing demand for recycled products including re-refined oil, (v) enhance our commitment to sustainability, (vi) leverage the combined sales forces to maximize cross-selling opportunities, (vii) add an immediately accretive (exclusive of transaction costs) business to accelerate growth, (viii) leverage operating efficiencies through the combined company and (ix) add to our cash flow.
Prior to the acquisition, Safety-Kleen reported its business in two reportable segments, consisting of:
Oil Re-Refining Services—processes used oil at two owned and operated oil re-refineries into high quality base and blended lubricating oils, which are then sold to third party customers.
Environmental Services—provides a broad range of environmental services, such as parts cleaning, containerized waste services, oil collection, recycling of oil in excess of Safety-Kleen's current re-refining capacity into recycled fuel oil which is then sold to third parties, and other complimentary products and services, including vacuum services, allied products, total project management and other environmental services.
As stated in Item 8, "Financial Statements and Supplementary Data," no revenue, expense, income or loss of Safety-Kleen is included in our consolidated results of operations for the year ended December 31, 2012 due to the immateriality of the operating results subsequent to the December 28, 2012 acquisition date. Safety-Kleen's balance sheet amounts have been reported in total for purposes of our consolidated balance sheet and the segment disclosures as of December 31, 2012. With the acquisition, we are reviewing our consolidated operations and organizational structure on a go forward basis. We expect to adjust our reportable segments and reporting units in the first quarter of our 2013 fiscal year after completion of our review.
Health & Safety
Health & Safety is our #1 priority—companywide. Employees at all levels of the Company share this philosophy and are committed to ensuring our safety goals are met. Our commitment to health and safety benefits everyone—our employees, our customers, the community, and the environment. Through the efforts of all our employees, we have implemented a successful health and safety-based culture that has continued to lower our Total Recordable Incident Rate ("TRIR"); Days Away, Restricted Activity and Transfer Rate ("DART"); and Experience Modification Rate ("EMR").
In order to protect our employees, continue to lower our incident rates, and satisfy our customers' demands to retain the best service providers with the lowest TRIR, DART and EMR rates, we are fully committed to continuously improving our health and safety performance. To meet all of these requirements we implemented SafetyFirst!, a comprehensive program companywide. SafetyFirst! is an employee-based program. All employees recognize the importance of protecting themselves, their fellow employees, their customers, and all those around them from harm. They demonstrate through their words and actions that they will reinforce acceptable safety practices and stop unsafe acts before those acts become a statistic. SafetyFirst! is not just a slogan—it's our commitment to keep the protection of our fellow workers in the forefront of everything we do.
Compliance
We regard compliance with applicable environmental regulations as a critical component of our overall operations. We strive to maintain the highest professional standards in our compliance activities. Our internal operating requirements are in many instances more stringent than those imposed by regulation. Our compliance program has been developed for each of our waste management facilities and service centers under the direction of our compliance staff. The compliance staff is responsible for facilities permitting and regulatory compliance, compliance training, transportation compliance, and related record keeping. To ensure the effectiveness of our regulatory compliance program, our compliance staff monitors daily operational activities and issues a monthly report to senior management concerning the status of environmental compliance and health and safety programs. We also have an Environmental Health and Safety Compliance Internal Audit Program designed to identify any weaknesses or opportunities for improvement in our ongoing compliance programs. We also perform periodic audits and inspections of the disposal facilities owned by other companies which we utilize.
Our facilities are frequently inspected and audited by regulatory agencies, as well as by customers. Although our facilities have been cited on occasion for regulatory violations, we believe that each of our facilities is currently in substantial

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compliance with applicable requirements. Each of our major facilities and service centers has a full-time compliance representative to oversee the implementation of our compliance program at the facility or service center.
Protecting the Environment and Environmental Sustainability
As reflected in Clean Harbors' tagline "People and Technology Creating a Safer, Cleaner Environment," our core business is to provide industry, government and the public a wide range of environmental, energy and industrial services that protect and restore North America's natural environment.
As North America's premier provider of environmental as well as energy and industrial services, our first goal is to help our customers prevent the release of hazardous wastes into the environment. We are also the leading service provider in situations involving the recovery and decontamination of pollutants that have been released to the environment. This includes the safe destruction or disposal of those hazardous materials in a manner that ensures these materials are no longer a danger to the environment. When providing these services, we are committed to the recycling, reuse and reclamation of these wastes whenever possible using a variety of methods more fully explained below in the sections describing our general operations. Our acquisition of Safety-Kleen in December 2012, in particular Safety-Kleen's operations related to recycling and re-refining of used oil, will significantly enhance our recycling, reuse and reclamation efforts.
We have also become the leading North American provider of services to protect the ozone layer from the destructive effects of chlorofluorocarbons ("CFCs"), which are 5,000 to 10,000 times more destructive to the ozone layer than other greenhouse gases. Clean Harbors has the most U.S. Environmental Protection Agency (the "EPA") approved CFC disposal capacity regulated under the Montreal Protocol, and we destroyed approximately 575,000 pounds of CFCs in 2012. The destruction of this volume of CFCs at the Company's El Dorado, Arkansas facility led to the registration of over 1.6 million metric tons of avoided carbon dioxide emissions with the Climate Action Reserve, a green house gas registry affiliated with the State of California.
One of our most highly visible public programs for various governmental and community entities involves the removal of thousands of tons of hazardous wastes, from households throughout the United States and Canada, that might otherwise be improperly disposed of or become dangerous to the communities where they are stored.
As we provide these wide-ranging services throughout North America, we are committed to ensuring that our own operations are environmentally responsible. Through our efforts to implement numerous energy efficiency improvements, green purchasing, company-wide recycling programs, and various transportation initiatives including greater rail utilization and limits on the speeds and idling time of our many vehicles, we are making our operations more environmentally sustainable.
Recent initiatives involving our remediation activities include the use of solar-powered probes to recover groundwater at a site undergoing groundwater monitoring. A more comprehensive project was the installation of a 1.5Mw solar array at a closed and capped landfill located in New Jersey to provide electric power for a continuously operating groundwater decontamination pump and treatment system at the site. The solar array was installed and became operable in the second quarter of 2011. The solar array provides virtually all of the power needed to operate the system with a sustainable supply of renewable electric energy, and is an adaptive re-use of an otherwise unusable Brownfield site.
Strategy
Our strategy is to develop and maintain ongoing relationships with a diversified group of customers which have recurring needs for environmental, energy or industrial services. We strive to be recognized as the premier supplier of a broad range of value-added services based upon quality, responsiveness, customer service, information technologies, breadth of service offerings and cost effectiveness.
The principal elements of our business strategy are to:
Expand Service Offerings and Geographic Coverage—We believe our Technical and Field Services segments have a competitive advantage, particularly in areas where service locations are located at or near a treatment, storage and disposal facility ("TSDF"). By opening additional service locations in close proximity to our TSDFs, we believe that we can, with minimal capital expenditures, increase our market share within the Field Services segment. We believe this will drive additional waste to our existing facilities, thereby increasing utilization and enhancing overall profitability. Furthermore, we believe we can expand our Industrial and Oil and Gas Field Services segments across a broader geographic area, thereby providing additional services to new markets.
Cross-Sell Across Segments—We believe the breadth of our service offerings allows us to provide additional services to existing customers. In particular, we believe we can provide energy and industrial services to customers which traditionally have only used our environmental services and environmental services to customers which traditionally

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have only used our energy and industrial services. We believe leveraging our ability to cross-sell environmental and energy and industrial services will drive increased revenue within our existing customer base.
Capture Large-Scale Projects—We provide turnkey offsite transportation and landfill or incineration disposal services for soil and other contaminated media generated from remediation activities. We also assist remediation contractors and project managers with support services including groundwater disposal, investigation derived waste disposal, rolloff container management, and many other related services. We believe this will drive incremental waste volume to our existing facilities, thereby increasing utilization and enhancing overall profitability.
Expand Throughput Capacity of Existing Waste Facilities—We operate an extensive network of hazardous waste management facilities and have made substantial investments in these facilities, which provide us with significant operating leverage as volumes increase. In addition, there are opportunities to expand waste handling capacity at these facilities by modifying the terms of the existing permits and by adding equipment and new technology. Through selected permit modifications, we can expand the range of treatment services offered to our customers without the large capital investment necessary to acquire or build new waste management facilities.
Pursue Selective Acquisitions—We actively pursue accretive acquisitions in certain services or market sectors where we believe such acquisitions can enhance and expand our business such as our acquisition of Safety-Kleen on December 28, 2012. We believe that we can expand existing services, especially in our non-disposal services, through strategic acquisitions in order to generate incremental revenues from existing and new customers and to obtain greater market share.
Focus on Cost, Pricing and Productivity Initiatives—We continually seek to increase efficiency and to reduce costs in our business through enhanced technology, process efficiencies and stringent expense management.
Competitive Strengths
Leading Provider of Environmental, Energy and Industrial Services—We are one of the largest providers of environmental, energy and industrial services and the largest operator of non-nuclear hazardous waste treatment facilities in North America. We provide multi-faceted and low cost services to a broad mix of customers. We attract and better serve our customers because of our capabilities and the size, scale and geographic location of our assets, which allow us to serve multiple locations. Based on 2009 industry data, we service approximately 69% of North America's commercial hazardous incineration volume and 21% of North America's hazardous landfill volume.
Large and Diversified Customer Base—Our customers range from Fortune 500 companies to midsize and small public and private entities that span multiple industries and business types, including governmental entities. This diversification limits our credit exposure to any one customer or industry. The top ten industries we serviced as a percentage of our 2012 revenues were oil and gas production (27%), oil and gas exploration (26%), chemical (14%), general manufacturing (8%), refineries and upgraders (7%), brokers (5%), utilities (4%), terminals and pipelines (3%), engineering and consulting (3%) and government (3%).
Stable and Recurring Revenue Base—We have long-standing relationships with our customers. Our diversified customer base also provides stable and recurring revenues as a majority of our revenues are derived from previously served customers with recurring needs for our services. In addition, the costs to many of our customers of switching providers are high. This is due to many customers' desire to audit disposal facilities prior to their qualification as approved sites and to limit the number of facilities to which their wastes are shipped in order to reduce their potential liability under United States and Canadian environmental regulations. We have been selected as an approved vendor by large generators of waste because we possess comprehensive collection, recycling, treatment, transportation, disposal, and waste tracking capabilities and have the expertise necessary to comply with applicable environmental laws and regulations. Those customers that have selected us as an approved vendor typically continue to use our services on a recurring basis.
Comprehensive Service Capabilities—Our comprehensive service offerings allow us to act as a full-service provider to our customers. Our full-service orientation creates incremental revenue growth as customers seek to minimize the number of outside vendors and demand "one-stop" service providers.
Integrated Network of Assets—We believe we operate, in the aggregate, the largest number of hazardous waste incinerators, landfills, treatment facilities and TSDFs in North America. Our broad service network enables us to effectively handle a waste stream from origin through disposal and to efficiently direct and internalize our waste streams to reduce costs. As our processing of wastes increases, our size allows us to increase our cash flow and earnings as we can internalize a greater volume of waste in our incinerators and landfills.
Regulatory Compliance—We continue to make capital investments in our facilities to ensure that they are in compliance with current federal, state, provincial and local regulations. Companies that rely on in-house disposal may

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find the current regulatory requirements to be too capital intensive or complicated, and may choose to outsource many of their hazardous waste disposal needs.
Effective Cost Management—Our significant scale allows us to maintain low costs through standardized compliance procedures, significant purchasing power, research and development capabilities and our ability to efficiently utilize logistics and transportation to economically direct waste streams to the most efficient facility. We also have the ability to transport and process with internal resources the substantial majority of all hazardous waste that we manage for our customers. Finally, we are committed to reducing costs, and managing headcount and other operating costs. Our Adjusted EBITDA Margin (our Adjusted EBITDA expressed as a percentage of our revenues) increased from 14.7% for the year ended December 31, 2009 to 17.1% for the year ended December 31, 2012, and our selling, general and administrative expenses as a percentage of sales decreased from 15.2% to 12.5% over the same period.
Proven and Experienced Management Team—Our executive management team provides depth and continuity. Our 17 executive officers collectively have over 310 years of experience in the environmental, energy and industrial services industries. Our Chief Executive Officer founded our Company in 1980, and the average experience of the 16 other members of the executive management team exceeds 17 years.
Operations
General
During 2012, we reported our business in the previously discussed four operating segments, which are Technical Services, Field Services, Industrial Services and Oil and Gas Field Services.
Seasonality and Cyclical Nature of Business.    Our operations may be affected by seasonal fluctuations due to weather and budgetary cycles influencing the timing of customers' spending for remedial activities. Typically during the first quarter of each year there is less demand for environmental services due to the cold weather, particularly in the Northern and Midwestern United States and Canada. Accordingly, reduced volumes of waste are received at our facilities and higher operating costs are associated with operating in sub-freezing weather and high levels of snowfall. 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 us during the first quarter of the following year.
Conversely, typically during the first quarter of each year there is more demand for energy and industrial services due to the cold weather, particularly in Alberta, Canada, and less demand during the warmer months. The main reason for this is that the areas we service in Alberta are easier to access when the cold conditions make the terrain more suitable for companies to deploy their equipment. During the warmer months, thawing and mud conditions may impede deployment of equipment.
Geographical Information.    For the year ended December 31, 2012, we generated $1,254.2 million or 57.3% of revenues in the United States and Puerto Rico, $933.0 million or 42.6% of revenues in Canada, and less than 1.0% of revenues in other international locations. For the year ended December 31, 2011, we generated $1,149.4 million or 57.9% of revenues in the United States and Puerto Rico, $833.6 million or 42.0% of revenues in Canada, and less than 1.0% of revenues in other international locations. For additional information about the geographical areas from which our revenues are derived and in which our assets are located, see Note 18, "Segment Reporting," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," in this report.
Technical Services
These services involve the collection, transport, treatment and disposal of hazardous and non-hazardous wastes, and include resource recovery, physical treatment, fuels blending, incineration, landfill disposal, wastewater treatment, lab chemical disposal, explosives management, and CleanPack® services. Our CleanPack services include the collection, identification and categorization, specialized packaging, transportation and disposal of laboratory chemicals and household hazardous wastes. Our technical services are provided through a network of service centers from which a fleet of trucks are dispatched to pick up customers' waste either on a predetermined schedule or on-demand, and to deliver the waste to permitted facilities, which are usually Company-owned. Our service centers can also dispatch chemists to a customer location for the collection of chemical and laboratory waste for disposal.
Collection, Transportation and Logistics Management.    As an integral part of our services, we collect industrial wastes from customers and transport such wastes to and between our facilities for treatment or bulking for shipment to final disposal locations. Customers typically accumulate waste in containers, such as 55 gallon drums, bulk storage tanks or 20 cubic yard roll-off containers. In providing this service, we utilize a variety of specially designed and constructed tank trucks and semi-trailers as well as third-party transporters, including railroads.

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Treatment and Disposal.    We recycle, treat and dispose of hazardous and non-hazardous industrial wastes. The wastes handled include substances which are classified as "hazardous" because of their corrosive, ignitable, infectious, reactive or toxic properties, and other substances subject to federal, state and provincial environmental regulation. We provide final treatment and disposal services designed to manage wastes which cannot be otherwise economically recycled or reused. The wastes we handle come in solid, sludge, liquid and gas form.
We operate a network of TSDFs that collect, temporarily store and/or consolidate compatible waste streams for more efficient transportation to final recycling, treatment or disposal destinations. These facilities hold special permits, such as Part B permits under the Resource Conservation and Recovery Act ("RCRA") in the United States, which allows them to process waste through various technologies including recycling, incineration, and landfill and wastewater treatment.
Resource Recovery and Fuels Blending.    We operate recycling systems for the reclamation and reuse of certain wastes, particularly solvent-based wastes generated by industrial cleaning operations, metal finishing and other manufacturing processes. Resource recovery involves the treatment of wastes using various methods, which effectively remove contaminants from the original material to restore its fitness for its intended purpose and to reduce the volume of waste requiring disposal.
Spent solvents that can be recycled are processed through fractional distillation, thin film evaporation and other processes and are recovered into usable products. Upon recovery of these products, we either return the recovered solvents to the original generator or sell them to third parties. Organic liquids and solids with sufficient heat value are blended to meet strict specifications for use as supplemental fuels for incinerators, cement kilns, industrial furnaces and other high efficiency boilers. We have installed fuels blending equipment at some TSDFs to prepare these supplemental fuels. When possible, we burn fuel blended material at our incinerators. Otherwise, we send the fuel blended material to supplemental fuel users that are licensed to accept the blended fuel material. Although we pay a fee to the users that accept this product, this disposal method is substantially less costly than other disposal methods.
We also operate a recycling facility that recycles refinery waste and spent catalyst. The recycled oil and recycled catalyst are sold to third parties.
Incineration.    Incineration is the preferred method for the treatment of organic hazardous waste, because it effectively destroys the contaminants at high temperatures. High temperature incineration effectively eliminates organic wastes such as herbicides, halogenated solvents, pesticides, and pharmaceutical and refinery wastes, regardless of whether they are gases, liquids, sludge or solids. Federal and state incineration regulations require a destruction and removal efficiency of 99.99% for most organic wastes and 99.9999% for polychlorinated biphenyls ("PCBs") and dioxins.
As of December 31, 2012, we had five active incineration facilities that offer a wide range of technological capabilities to customers through this network. In the United States, we operate a fluidized bed thermal oxidation unit for maximum destruction efficiency of hazardous waste with an estimated annual capacity of 58,808 tons and three solids and liquids capable incineration facilities with a combined estimated annual capacity of 327,400 tons. We also operate one hazardous waste liquid injection incinerator in Canada with total annual capacity of approximately 94,000 tons. In the fourth quarter of 2011, we temporarily idled for approximately 18 months our additional hazardous waste incinerator in Ville Mercier, Quebec. Factors influencing the decision included additional disposal capacity acquired in 2011, declining local market conditions in Quebec, and our ability to transfer waste streams to our other facilities.
Our incineration facilities in Kimball, Nebraska, Deer Park, Texas, El Dorado, Arkansas and Aragonite, Utah are designed to process liquid organic wastes, sludge, solids, soil and debris. Our Deer Park facility has two kilns and a rotary reactor. Our El Dorado incineration facility specializes in the treatment of bulk and containerized hazardous liquids, solids and sludge through two rotary kilns. Our incineration facilities in Kimball and Deer Park have on-site landfills for the disposal of ash produced as a result of the incineration process.
Our incineration facilities in Mercier, Quebec and Lambton, Ontario are liquid injection incinerators, designed primarily for the destruction of liquid organic wastes. Typical waste streams include wastewater with low levels of organics and other higher concentration organic liquid wastes not amenable to conventional physical or chemical waste treatment.
Landfills.    Landfills are used primarily for the disposal of inorganic wastes. In the United States and Canada, we operate nine commercial landfills. Seven of our commercial landfills are designed and permitted for the disposal of hazardous wastes and two of our landfills are operated for non-hazardous industrial waste disposal and, to a lesser extent, municipal solid waste. In addition to our commercial landfills, we also own and operate two non-commercial landfills that only accept waste from our on-site incinerators.
Of our seven commercial landfills used for disposal of hazardous waste, five are located in the United States and two are located in Canada. As of December 31, 2012, the useful economic lives of these landfills include approximately 25.4 million cubic yards of remaining capacity. This estimate of the useful economic lives of these landfills includes permitted airspace and

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unpermitted airspace that our management believes to be probable of being permitted based on our analysis of various factors. In addition to the capacity included in the useful economic lives of these landfills, there are approximately 33.1 million cubic yards of additional unpermitted airspace capacity included in the footprints of these landfills that may ultimately be permitted. There can be no assurance that this unpermitted additional capacity will be permitted. In addition to the hazardous waste landfills, we operate two non-hazardous industrial landfills with 3.5 million cubic yards of remaining permitted capacity. These two facilities are located in the United States and have been issued operating permits under the authority of Subtitle D of RCRA. Prior to issuance of a permit, we must demonstrate to the permitting agency that our non-hazardous industrial landfills have, and must subsequently employ, operational programs protective of the integrity of the landfill, human health and the surrounding environment. Our non-hazardous landfill facilities are permitted to accept commercial industrial waste, including wastes from foundries, demolition and construction, machine shops, automobile manufacturing, printing, metal fabrications and recycling.
Many of our landfills perform physical treatment of waste prior to final disposal. Physical treatment methods include separation and stabilization. These methods are used to reduce the volume or toxicity of waste material.
Wastewater Treatment.    We operate seven wastewater treatment facilities that offer a range of wastewater treatment technologies. These wastewater treatment operations involve processing hazardous and non-hazardous wastes through the use of physical and chemical treatment methods. Our wastewater treatment facilities treat a broad range of industrial liquid and semi-liquid wastes containing heavy metals, organics and suspended solids.
Field Services
These services provide customers with highly skilled experts who utilize specialty equipment and resources to perform services at any chosen location. Our field service crews and equipment are dispatched on a planned or emergency basis, and perform services such as confined space entry for tank cleaning, site decontamination, large remediation projects, demolition, spill cleanup, railcar cleaning, product recovery and transfer, scarifying and media blasting and vacuum services. Additional services include used oil and oil products recycling. Other services include filtration and water treatment services.
We are a leader in providing response services for environmental emergencies of any scale from man-made disasters, such as oil spills and natural disasters such as hurricanes.
Industrial Services
These services include a wide range of industrial maintenance services and specialty industrial services provided at refineries, mines, upgraders, chemical plants, pulp and paper mills, manufacturing, and power generation facilities. We provide these services throughout North America, including a presence in the oil sands region in Alberta, Canada.
Our crews handle as-needed in-plant services to support ongoing in-plant cleaning and maintenance services, including liquid/dry vacuum, hydro-blasting, steam cleaning and chemical hauling. We provide a variety of specialized industrial services including plant outage and turnaround services, decoking and pigging, catalyst handling, chemical cleaning, high and ultra-high pressure water cleaning, and large tank and surface impoundment cleaning. Our lodging services primarily consist of providing premier industrial lodges and drill camp accommodations for companies operating in the Alberta oil sands and other regions.
Oil and Gas Field Services
These services support exploration, drilling and production programs for oil and gas companies. Some of the core services we offer include geospatial data imaging, seismic surveying and line clearing, and heli-portable and track drilling. Our surface rental services provide a variety of oilfield equipment to support access to well-sites, well-site equipment, and well production equipment. We also offer directional boring services to support oil and gas companies and municipalities by installing pipeline, fiber optic, cable, gas, and water and sewer lines.
Seismic Services. These services provide turnkey project management and are a one-stop-shop for customers' complete surveying, cutting, and drilling needs. With the depth of our in-house resources of manpower and equipment, we have the ability to scale our teams to meet customer demands. Our teams lay out, cut, and survey source and receiver lines, and perform seismic drilling. Our techniques maximize efficiencies and minimize environmental impact. From planning to equipment utilization, our experienced professionals deliver quality service.
Oil & Gas & Completion Support. These services support oil and gas companies' drilling and well completion. We provide fracking water-treatment and disposal and drilling fluids and solids disposal, along with the rental of rolloffs, frack tanks and access and rig mats. Key to our services is our ability to provide solids control to support the drilling process. Our technologies help to manage liquids, solids and semi-solid material during the drilling operation, and include centrifuges, tanks,

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and drilling fluid recovery. We also provide surface rentals to support drill sites, by providing well-site trailers, wastewater treatment systems and holding tanks, EnviroBins, light towers, generators and handling tools, and hauling of fluids.
Safety-Kleen Services
Through our Safety-Kleen subsidiary, acquired in December 2012, we provide a range of environmentally-responsible products and services including used oil recycling and re-refining, parts cleaning and environmental solutions.
Oil Re-Refining Services. We collect used oil from sources including automobile and truck dealers, automotive garages, oil change outlets, fleet service locations, and industrial plants, and process or re-refine in our two oil re-refining facilities a portion of the collected used oil into a variety of products, including base and blended lubricating oils. We then sell a portion of our base oils to other producers of blended lubricating oils as a "green" alternative to base oil produced from virgin crude oil. These producers are then able to offer products to their customers that are made from a sustainable and environmentally friendly source. We formulate the remainder of our base oils into blended lubricating oils by adding performance addictives in accordance with our proprietary formulations and American Petroleum Institute licenses. We then either sell the finished products to customers, which resell under private labels, or directly under our own branded EcoPower label.
Environmental Services. We offer a range of environmental services and the sale of complementary products to diverse range of customers including automobile repair stations, car and truck dealers, engine repair shops, fleet maintenance shops and other automotive, retail and industrial customers.
We are the largest provider of parts cleaning services in North America, providing specially designed parts washers at our customers' premises and then, on a recurring basis, deliver clean solvent or aqueous-based washing fluid, clean and service the parts washers, and remove the used solvent or aqueous fluid. We also sell allied products including degreasers, glass and floor cleaners, hand cleaners, absorbents, antifreeze, windshield washer fluid, and mats and spill kits.
Utilizing our collection network, we provide the pickup and transportation of hazardous and non-hazardous containerized waste for recycling or disposal, primarily through the Clean Harbors network of recycling and waste treatment and disposal facilities. As described above, a portion of such collected wastes consists of used oil which serves as feedstock for our oil re-refineries. To the extent the remainder of such collected used oil is not suitable for re-refining or we do not currently have sufficient re-refining capacity to process all of such collected oil, we process that remainder into recycled fuel oil, or “RFO,” by dehydratring, chemically treating and filtering it to remove contaminants. We then sell our RFO to asphalt plants, industrial plants, blenders, pulp and paper companies, and vacuum gas oil (VGO) and marine diesel oil (MDO) producers.
Our vacuum services provide the removal of solids, residual oily water and sludge and other fluids from our customers' oil/water separators, sumps and collection tanks. We also remove and collect waste fluids found at large and small industrial locations, including metal fabricators, auto maintenance providers, and general manufacturers.
We provide total project management services in areas such as chemical packing, on-site waste management, remediation, compliance training and emergency spill response, leveraging the Clean Harbors network of Technical and Field Services centers and capabilities.
Competition
The hazardous waste management industry in which we compete is highly competitive. The sources of competition vary by locality and by type of service rendered, with competition coming from national and regional waste services companies and hundreds of privately-owned firms. Philip Services Corp. (PSC), Veolia Environmental Services, and Waste Management, Inc. (WM) are the principal national firms with which we compete. Each of these competitors is able to provide one or more of the environmental services offered by us.
Under federal and state environmental laws in the United States, generators of hazardous waste remain liable for improper disposal of such wastes. Although generators may hire companies that have the proper permits and licenses, because of the generators' potential liability, they are very interested in the reputation and financial strength of the companies they use for the management of their hazardous wastes. We believe that our technical proficiency and reputation are important considerations to our customers in selecting and continuing to utilize our services.
We believe that the depth of our recycling, treatment and disposal capabilities and our ability to collect and transport waste products efficiently, quality of service, safety, and pricing are the most significant factors in the market for treatment and disposal services.

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For our technical and field services, competitors include several major national and regional environmental services firms, as well as numerous smaller local firms. We believe the availability of skilled technical professional personnel, quality of performance, diversity of services and price are the key competitive factors in this service industry.
The energy and industrial services industry in which we compete is also highly competitive. The sources of competition vary by locality and by type of service rendered, with competition coming from national and regional service providers, and hundreds of privately-owned firms that offer energy or industrial services. CEDA International Corporation and Newalta in Canada, and Philip Services Corp. and Veolia Environmental Services in the United States, are the principal national firms with which we compete. Each of these competitors is able to provide one or more of the energy or industrial services offered by us. We believe the availability of specialized equipment, skilled technical professional personnel, quality of performance, diversity of services and price are the key competitive factors in this industry.
The principal methods of competition for all of our services are price, quality, reliability of service rendered and technical proficiency. We believe that we offer a more comprehensive range of environmental, energy and industrial services than our competitors in major portions of our service territory.
Employees
As of December 31, 2012, we employed approximately 13,180 active full-time employees, of which 1,359 employees (10%) are represented by labor unions. We believe that our relationship with our employees is satisfactory.
 
Clean Harbors
 
Safety-Kleen
 
Total Number of
Employees
Unions in the United States:
 
 
 
 
 
International Brotherhood of Teamsters
196

 

 
196

International Union of Operating Engineers
33

 

 
33

United Steelworkers' Union
322

 

 
322

Unions in Canada:
 
 
 
 
 
Communication, Energy and Paper Workers Union
96

 

 
96

International Brotherhood of Teamsters
592

 

 
592

International Union of Operating Engineers
22

 

 
22

International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers
72

 

 
72

Machinists Union

 
10

 
10

Syndicat National Des Travailleuses et Travailleurs De L'Environnement

 
9

 
9

Canadian Brotherhood of Teamsters

 
7

 
7

Non-union employees
7,629

 
4,192

 
11,821

 
8,962

 
4,218

 
13,180

As part of our commitment to employee safety and quality customer service, we have an extensive compliance program and a trained environmental, health and safety staff. We adhere to a risk management program designed to reduce potential liabilities to us and to our customers.
Intellectual Property
We have invested significantly in the development of proprietary technology and also to establish and maintain an extensive knowledge of leading technologies and incorporate these technologies into the services we offer and provide to our customers. With the acquisition of Safety-Kleen, we hold a total of 60 U.S. and 122 foreign patents (which will expire between 2013 and 2030), and 69 U.S. and 184 foreign trademarks. We also license software and other intellectual property from various third parties. We enter into confidentiality agreements with certain of our employees, consultants and corporate partners, and control access to software documentation and other proprietary information. We believe that we hold adequate rights to all intellectual property used in our business and that we do not infringe upon any intellectual property rights held by other parties.
Management of Risks
We adhere to a program of risk management policies and practices designed to reduce potential liability, as well as to manage customers' ongoing environmental exposures. This program includes installation of risk management systems at our

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facilities, such as fire suppression, employee training, environmental, auditing and policy decisions restricting the types of wastes handled. We evaluate all revenue opportunities and decline those that we believe involve unacceptable risks.
We dispose of waste at our incineration, wastewater treatment and landfill facilities, or at facilities owned and operated by other firms that we have audited and approved. Typically, we apply established technologies to the treatment, storage and recovery of hazardous wastes. We believe our operations are conducted in a safe and prudent manner and in substantial compliance with applicable laws and regulations.
Insurance and Financial Assurance
Our insurance programs cover the potential risks associated with our multifaceted operations from two primary exposures: direct physical damage and third party liability. We maintain a casualty insurance program providing coverage for vehicles, employer's liability and commercial general liability in the aggregate amount of $55.0 million, $52.0 million and $52.0 million, respectively, per year, subject to a retention of $0.5 million per occurrence in each of the United States and Canada. We also have workers' compensation insurance whose limits are established by state statutes. Since the early 1980s, casualty insurance policies have typically excluded liability for pollution, which is covered under a separate pollution liability program; however, our auto liability policy does provide the first $5.0 million of transportation pollution insurance.
We have pollution liability insurance policies covering potential risk in three areas: as a contractor performing services at customer sites, as a transporter of waste and for waste processing at our facilities. The contractor's pollution liability insurance has limits of $15.0 million per occurrence and $25.0 million in the aggregate, covering offsite remedial activities and associated liabilities. A $0.25 million deductible applies to this policy.
For in-transit pollution liability, the pollution liability policy provides coverage for up to $45.0 million per occurrence and $55.0 million aggregate excess above the primary $5.0 million auto liability policy. The combined policies provide us with coverage for up to $50.0 million per occurrence and $60.0 million aggregate for sudden and accidental occurrences during transportation of waste from the time waste is picked up from a customer until its delivery to the final disposal site. A $0.5 million deductible applies to this coverage in the United States and a $0.5 million deductible in Canada.
Federal and state regulations require liability insurance coverage for all facilities that treat, store or dispose of hazardous waste. RCRA, the Toxic Substances Control Act, and comparable state hazardous waste regulations typically require hazardous waste handling facilities to maintain pollution liability insurance in the amount of $1.0 million per occurrence and $2.0 million in the aggregate for sudden occurrences, and $3.0 million per occurrence and $6.0 million in the aggregate for non-sudden occurrences. Steadfast Insurance Company (a unit of Zurich Insurance N.A.) provides insurance for our treatment, storage and disposal activities that meet the regulatory requirements. In addition, this policy provides excess limits above the regulatory requirements up to $30.0 million.
Safety-Kleen maintains a casualty insurance program that includes general liability (including products liability), workers' compensation, automobile liability and general health insurance utilizing high deductibles and self-insured retentions. The casualty program has aggregate limits of $77.0 million for General Liability, $80.0 million for auto liability and $77.0 million for Employers Liability. The General Liability is subject to $0.5 million self- insured retention followed by a $1.5 million deductible, the Auto Liability is subject to a $5.0 million deductible and the Employers Liability is subject to a $1.0 million deductible. Safety-Kleen purchases pollution legal liability insurance to cover sudden and non-sudden pollution events that occur at facilities owned or operated by Safety-Kleen with limits of $20.0 million per accident and $60.0 million in the aggregate.
Our international operations are insured under locally placed insurance policies for insurance that are compulsory to place in a specific country. In addition, we have a global foreign liability policy that will provide excess and difference in condition coverage in all international countries.
Under our insurance programs, coverage is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. It is our policy to retain a significant portion of certain expected losses related primarily to employee benefit, workers' compensation, commercial general and vehicle liability. Provisions for losses expected under these programs are recorded based upon our estimates of the actuarial calculation of the aggregate liability for claims. We believe that policy cancellation terms are similar to those of other companies in other industries.
Operators of hazardous waste handling facilities are also required by federal, state and provincial regulations to provide financial assurance for closure and post-closure care of those facilities should the facilities cease operation. Closure would include the cost of removing the waste stored at a facility which ceased operating and sending the material to another facility for disposal and the cost of performing certain procedures for decontamination of the facility. As of December 31, 2012, our total estimated closure and post-closure costs requiring financial assurance by regulators (other than for Safety-Kleen's facilities acquired as part of our acquisition of Safety-Kleen on December 28, 2012) were $343.1 million for our U.S. facilities and $22.4

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million for our Canadian facilities. We have obtained all of the required financial assurance for our facilities (other than those acquired as part of the Safety-Kleen acquisition) from a qualified insurance company, Zurich Insurance N.A., and its affiliated companies. The closure and post-closure obligations of our U.S. facilities (other than those acquired as part of the Safety-Kleen acquisition) are insured by an insurance policy written by Steadfast Insurance Company (a unit of Zurich Insurance N.A.), which will expire in 2013. Our Canadian facilities (other than those acquired as part of the Safety-Kleen acquisition) utilize surety bonds provided through Zurich Insurance Company (Canada), which expire at various dates throughout 2013. In connection with obtaining such insurance and surety bonds, we have provided to Steadfast Insurance Company $73.5 million of letters of credit which we obtained from our lenders under our revolving credit agreement.
As of December 31, 2012, Safety-Kleen’s total estimated closure, post-closure costs and corrective action costs requiring financial assurance by regulators were $46.8 million for Safety-Kleen’s U.S. facilities and $5.3 million for Safety-Kleen’s Canadian facilities. Safety-Kleen has obtained all of the required U.S. financial assurance for its facilities from a qualified insurance company, XL Insurance Company, and its affiliated companies, which will expire in 2013, except for Safety-Kleen’s Pennsylvania facilities which utilize letters of credit. In connection with obtaining such insurance for its U.S facilities, Safety-Kleen has provided to XL Insurance Company a $5.0 million letter of credit which Safety-Kleen obtained from its lenders under its revolving credit agreement. Safety-Kleen’s Canadian facilities utilize surety bonds provided through Travelers Insurance Company (Canada), which will expire in 2014, and letters of credit.
Environmental Regulation
While our business has benefited substantially from increased governmental regulation of hazardous waste transportation, storage and disposal, the environmental services industry itself has become the subject of extensive and evolving regulation by federal, state, provincial and local authorities. We are required to obtain federal, state, provincial and local permits or approvals for each of our hazardous waste facilities. Such permits are difficult to obtain and, in many instances, extensive studies, tests, and public hearings are required before the approvals can be issued. We have acquired all operating permits and approvals now required for the current operation of our business, and have applied for, or are in the process of applying for, all permits and approvals needed in connection with continued operation and planned expansion or modifications of our operations.
We make a continuing effort to anticipate regulatory, political and legal developments that might affect operations, but are not always able to do so. We cannot predict the extent to which any environmental legislation or regulation that may be enacted or enforced in the future may affect our operations.
United States Hazardous Waste Regulation
Federal Regulations.    The most significant federal environmental laws affecting us are the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund Act," the Clean Air Act, the Clean Water Act, and the Toxic Substances Control Act ("TSCA").
RCRA.    RCRA is the principal federal statute governing hazardous waste generation, treatment, transportation, storage and disposal. Pursuant to RCRA, the EPA has established a comprehensive "cradle-to-grave" system for the management of a wide range of materials identified as hazardous or solid waste. States that have adopted hazardous waste management programs with standards at least as stringent as those promulgated by the EPA have been delegated authority by the EPA to administer their facility permitting programs in lieu of the EPA's program.
Every facility that treats, stores or disposes of hazardous waste must obtain a RCRA permit from the EPA or an authorized state agency unless a specific exemption exists, and must comply with certain operating requirements (the Part B permitting process). RCRA also requires that Part B permits contain provisions for required on-site study and cleanup activities, known as "corrective action," including detailed compliance schedules and provisions for assurance of financial responsibility. See Note 9, "Closure and Post-Closure Liabilities," and Note 10, "Remedial Liabilities," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," for a discussion of our environmental liabilities. See "Insurance and Financial Assurance" above for a discussion of our financial assurance requirements.
The Superfund Act.    The Superfund Act is the primary federal statute regulating the cleanup of inactive hazardous substance sites and imposing liability for cleanup on the responsible parties. It also provides for immediate response and removal actions coordinated by the EPA to releases of hazardous substances into the environment, and authorizes the government to respond to the release or threatened release of hazardous substances or to order responsible persons to perform any necessary cleanup. The statute provides for strict and, in certain cases, joint and several liability for these responses and other related costs, and for liability for the cost of damages to natural resources, to the parties involved in the generation, transportation and disposal of such hazardous substances. Under the statute, we may be deemed liable as a generator or transporter of a hazardous substance which is released into the environment, or as the owner or operator of a facility from which there is a release of a hazardous substance into the environment. See Note 17, "Commitments and Contingencies," to our

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consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," for a description of the principal such proceedings in which we are involved.
The Clean Air Act.    The Clean Air Act was passed by Congress to control the emissions of pollutants into the air and requires permits to be obtained for certain sources of toxic air pollutants such as vinyl chloride, or criteria pollutants, such as carbon monoxide. In 1990, Congress amended the Clean Air Act to require further reductions of air pollutants with specific targets for non-attainment areas in order to meet certain ambient air quality standards. These amendments also require the EPA to promulgate regulations, which (i) control emissions of 189 hazardous air pollutants; (ii) create uniform operating permits for major industrial facilities similar to RCRA operating permits; (iii) mandate the phase-out of ozone depleting chemicals; and (iv) provide for enhanced enforcement.
The Clean Water Act.    This legislation prohibits discharges into the waters of the United States without governmental authorization and regulates the discharge of pollutants into surface waters and sewers from a variety of sources, including disposal sites and treatment facilities. The EPA has promulgated "pretreatment" regulations under the Clean Water Act, which establish pretreatment standards for introduction of pollutants into publicly owned treatment works. In the course of the treatment process, our wastewater treatment facilities generate wastewater, which we discharge to publicly owned treatment works pursuant to permits issued by the appropriate governmental authority. We are required to obtain discharge permits and conduct sampling and monitoring programs. We believe each of our operating facilities complies in all material respects with the applicable requirements.
TSCA.    We also operate a network of collection, treatment and field services (remediation) activities throughout North America that are regulated under provisions of TSCA. TSCA established a national program for the management of substances classified as polychlorinated biphenyls ("PCBs"), which include waste PCBs as well as RCRA wastes contaminated with PCBs. The rules set minimum design and operating requirements for storage, treatment and disposal of PCB wastes. Since their initial publication, the rules have been modified to enhance the management standards for TSCA-regulated operations including the decommissioning of PCB transformers and articles, detoxification of transformer oils, incineration of PCB liquids and solids, landfill disposal of PCB solids, and remediation of PCB contamination at customer sites.
Other Federal Laws.    In addition to regulations specifically directed at the transportation, storage, and disposal facilities, there are a number of regulations that may "pass-through" to the facilities based on the acceptance of regulated waste from affected client facilities. Each facility that accepts affected waste must comply with the regulations for that waste, facility or industry. Examples of this type of regulation are National Emission Standards for Benzene Waste Operations and National Emissions Standards for Pharmaceuticals Production. Each of our facilities addresses these regulations on a case-by-case basis determined by its ability to comply with the pass-through regulations.
In our transportation operations, we are regulated by the U.S. Department of Transportation, the Federal Railroad Administration, the Federal Aviation Administration and the U.S. Coast Guard, as well as by the regulatory agencies of each state in which we operate or through which our vehicles pass.
Health and safety standards under the Occupational Safety and Health Act ("OSHA") are applicable to all of our operations.
State and Local Regulations. Pursuant to the EPA's authorization of their RCRA equivalent programs, a number of U.S. states have regulatory programs governing the operations and permitting of hazardous waste facilities. Accordingly, the hazardous waste treatment, storage and disposal activities of a number of our facilities are regulated by the relevant state agencies in addition to federal EPA regulation.
Some states classify as hazardous some wastes that are not regulated under RCRA. For example, Massachusetts considers used oil as "hazardous wastes" while RCRA does not. Accordingly, we must comply with state requirements for handling state regulated wastes, and, when necessary, obtain state licenses for treating, storing, and disposing of such wastes at our facilities.
We believe that each of our facilities is in substantial compliance with the applicable requirements of federal and state laws, the regulations thereunder, and the licenses which we have obtained pursuant thereto. Once issued, such licenses have maximum fixed terms of a given number of years, which differ from state to state, ranging from three to ten years. The issuing state agency may review or modify a license at any time during its term. We anticipate that once a license is issued with respect to a facility, the license will be renewed at the end of its term if the facility's operations are in compliance with applicable requirements. However, there can be no assurance that regulations governing future licensing will remain static, or that we will be able to comply with such requirements.
Our wastewater treatment facilities are also subject to state and local regulation, most significantly sewer discharge regulations adopted by the municipalities which receive treated wastewater from the treatment processes. Our continued ability

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to operate our liquid waste treatment process at each such facility is dependent upon our ability to continue these sewer discharges.
Our facilities are regulated pursuant to state statutes, including those addressing clean water and clean air. Local sewer discharge and flammable storage requirements are applicable to certain of our facilities. Our facilities are also subject to local siting, zoning and land use restrictions. Although our facilities occasionally have been cited for regulatory violations, we believe we are in substantial compliance with all federal, state and local laws regulating our business.
Canadian Hazardous Waste Regulation
In Canada, the provinces retain control over environmental issues within their boundaries and thus have the primary responsibility for regulating management of hazardous wastes. The federal government regulates issues of national scope or where activities cross provincial boundaries.
Provincial Regulations.    Most of Canada's industrial development and the major part of its population are located in four provinces: Ontario, Quebec, Alberta and British Columbia. These provinces have the most detailed environmental regulations. We operate major waste management facilities in each of these provinces, as well as waste transfer facilities in Nova Scotia and Manitoba.
The main provincial acts dealing with hazardous waste management are:
Ontario—Environmental Protection Act;
Quebec—Environmental Quality Act;
Alberta—Environmental Protection and Enhancement Act; and
British Columbia—Waste Management Act.
These pieces of legislation were developed by the provinces independently and, among other things, generally control the generation, characterization, transport, treatment and disposal of hazardous wastes. Regulations developed by the provinces under the relevant legislation are also developed independently, but are often quite similar in effect and sometimes in application. For example, there is some uniformity in manifest design and utilization.
Provincial legislation also provides for the establishment of waste management facilities. In this case, the facilities are also controlled by provincial statutes and regulations governing emissions to air, groundwater and surface water and prescribing design criteria and operational guidelines.
Effective June 30, 2011, the Province of Quebec enacted the Clean Air Regulation to establish particulate and gas emissions standards, opacity standards, air quality standards and measures to prevent, eliminate or reduce the emissions of contaminants into the atmosphere. The regulation applies to every source of emissions in the Province and the requirements applicable to the Company's operations are phased in over a one-year period. The Company's current operations will require an upgrade to an air pollution control system which is not expected to require material cost.
Waste transporters require a permit to operate under provincial waste management regulations and are subject to the requirements of the Federal Transportation of Dangerous Goods legislation. They are required to report the quantities and disposition of materials shipped.
Within the provincial regulations, definitions of hazardous wastes are quite similar. Wastes can be defined as hazardous based on origin or characteristic and the descriptions or parameters involved are very similar to those in effect in the United States. A major difference between the United States regulatory regime and those in Canada relates to ownership and liability. Under Canadian provincial regulations, ownership changes when waste is transferred to a properly permitted third party carrier and subsequently to an approved treatment and disposal facility. This means that the generator is no longer liable for improper handling, treatment or disposal, responsibility having been transferred to the carrier or the facility. Exceptions may occur if the carrier is working under contract to the generator or if the waste is different from that which was originally contracted among the parties.
Canadian Federal Regulations.    The Canadian federal government has authority for those matters which are national in scope and in impact and for Canada's relations with other nations. The main federal laws governing hazardous waste management are:
Canadian Environmental Protection Act (1999) ("CEPA 99"), and
Transportation of Dangerous Goods Act.

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Environment Canada is the federal agency with responsibility for environmental matters and the main legislative instrument is the Canadian Environmental Protection Act. This act charges Environment Canada and Health Canada with protection of human health and the environment and seeks to control the production, importation and use of substances in Canada and to control their impact on the environment.
The Export and Import of Hazardous Wastes Regulations under CEPA 99 control the export and import of hazardous wastes and hazardous recyclable materials. By reference, these regulations incorporate the Transportation of Dangerous Goods Act and Regulations, which address identification, packaging, marking and documentation of hazardous materials during transport. CEPA 99 requires that anyone proposing to export or import hazardous wastes or hazardous recyclable materials or to transport them through Canada notify the Minister of the Environment and obtain a permit to do so. Section 9 of CEPA 99 allows the federal government to enter into administrative agreements with the provinces and territories for the development and improvement of environmental standards. These agreements represent cooperation towards a common goal rather than a delegation of authority under CEPA 99. To facilitate the development of provincial and territorial agreements, the federal, provincial and territorial governments participate in the Canadian Council of Ministers of the Environment ("CCME"). The CCME comprises the 14 environment ministers from the federal, provincial and territorial governments, who normally meet twice a year to discuss national environmental priorities and to determine work to be carried out under the auspices of the CCME.
Canadian Local and Municipal Regulations.    Local and municipal regulations seldom reference direct control of hazardous waste management activities. Municipal regulations and by-laws, however, control such issues as land use designation, access to municipal services and use of emergency services, all of which can have a significant impact on facility operation.
Compliance with Environmental Regulations
We incur costs and make capital investments in order to comply with the previously discussed environmental regulations. These regulations require that we remediate contaminated sites, operate our facilities in accordance with enacted regulations, obtain required financial assurance for closure and post-closure care of our facilities should such facilities cease operations, and make capital investments in order to keep our facilities in compliance with environmental regulations.
As discussed in Note 9, "Closure and Post-Closure Liabilities," and Note 10, "Remedial Liabilities," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," we have accrued environmental liabilities as of December 31, 2012, of $221.5 million, substantially all of which we assumed in connection with our acquisitions of the assets of the Chemical Services Division (the "CSD assets") of Safety-Kleen Corp. in 2002, Teris LLC in 2006, one of the two solvent recycling facilities we purchased from Safety-Kleen Systems, Inc. in 2008, and the remaining Safety-Kleen facilities acquired as part of our acquisition of Safety-Kleen in 2012. For the years ended December 31, 2012 and 2011, we spent $11.2 million and $11.3 million, respectively, to address environmental liabilities, almost all of the spending related to the environmental liabilities assumed as part of the acquisition of the CSD assets and Teris.
As discussed more fully above under the heading "Insurance and Financial Assurance," we are required to provide financial assurance with respect to certain statutorily required closure, post-closure and corrective action obligations at our facilities. We have placed the required financial assurance primarily through a qualified insurance company, Steadfast Insurance Company (a unit of Zurich N.A.).
As described in Note 17, "Commitments and Contingencies," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," we are involved in legal proceedings arising under environmental laws and regulations. Alleged failure to comply with laws and regulations may lead to the imposition of fines or the denial, revocation or delay of the renewal of permits and licenses by governmental entities. In addition, such governmental entities, as well as surrounding landowners, may claim that we are liable for environmental damages. Citizens groups have become increasingly active in challenging the grant or renewal of permits and licenses for hazardous waste facilities, and responding to such challenges has further increased the costs associated with establishing new facilities or expanding current facilities. A significant judgment against us, the loss of a significant permit or license, or the imposition of a significant fine could have a material effect on our business and future prospects.
ITEM 1A.    RISK FACTORS
An investment in our securities involves certain risks, including those described below. You should consider carefully these risk factors together with all of the information included in this report before investing in our securities.

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Risks Affecting Both Our Environmental Services and Energy and Industrial Services Businesses
Our businesses are subject to operational and safety risks.
Provision of both environmental services and energy and industrial services to our customers involves risks such as equipment defects, malfunctions and failures, and natural disasters, which could potentially result in releases of hazardous materials, injury or death of our employees, or a need to shut down or reduce operation of our facilities while remedial actions are undertaken. Our employees often work under potentially hazardous conditions. These risks expose us to potential liability for pollution and other environmental damages, personal injury, loss of life, business interruption, and property damage or destruction. We must also maintain a solid safety record in order to remain a preferred supplier to our major customers.
While we seek to minimize our exposure to such risks through comprehensive training programs, vehicle and equipment maintenance programs, and insurance, such programs and insurance may not be adequate to cover all of our potential liabilities and such insurance may not in the future be available at commercially reasonable rates. If we were to incur substantial liabilities in excess of policy limits or at a time when we were not able to obtain adequate liability insurance on commercially reasonable terms, our business, results of operations and financial condition could be adversely affected to a material extent. Furthermore, should our safety record deteriorate, we could be subject to a potential reduction of revenues from our major customers.
Our businesses are subject to significant competition.
We compete with a large number of companies, which range from large public companies to small operators that provide most of the same or similar services to those we offer. The 2008-2010 downturn in economic conditions, particularly with respect to manufacturing and oil and gas exploration and production, caused increased competition for market share. This competition resulted during that period and could in the future result in lower prices and reduced gross margins for our services and negatively affect our ability to grow or sustain our current revenue and profit levels in the future.
Our businesses are subject to numerous statutory and regulatory requirements, which may increase in the future.
Our businesses are subject to numerous statutory and regulatory requirements, and our ability to continue to hold licenses and permits required for our businesses is subject to maintaining satisfactory compliance with such requirements. These requirements may increase in the future as a result of statutory and regulatory changes. Although we are very committed to compliance and safety, we may not, either now or in the future, be in full compliance at all times with such statutory and regulatory requirements. Consequently, we could be required to incur significant costs to maintain or improve our compliance with such requirements.
Future conditions might require us to make substantial write-downs in our assets, which would adversely affect our balance sheet and results of operations.
We review our long-lived tangible and intangible assets other than goodwill for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We also test our goodwill assets for impairment at least annually on December 31, or when events or changes in the business environment indicate that the carrying value of a reporting unit may exceed its fair value. During and as of the end of each of 2012, 2011 and 2010, we determined that no asset write-downs were required; however, if conditions in either the environmental services or energy and industrial services businesses were to deteriorate significantly, we could determine that certain of our assets were impaired and we would then be required to write-off all or a portion of our costs for such assets. Any such significant write-offs would adversely affect our balance sheet and results of operations.
Fluctuations in foreign currency exchange could affect our financial results.
We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar. In fiscal 2012, we recorded 44% of our revenues outside of the United States, primarily in Canada. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses as well as assets and liabilities into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other currencies in countries where we operate will affect our results of operations and the value of balance sheet items denominated in foreign currencies. These risks are non-cash exposures. We manage these risks through normal operating and financing activities. We cannot be certain, however, that we will be successful in reducing the risks inherent in exposures to foreign currency fluctuations.


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If we are unable to successfully integrate the businesses and operations of Safety-Kleen and our other recent and any future acquisitions and realize synergies in the expected time frame, our future results would be adversely affected.

We have in the past significantly increased the size of our Company and the types of services we offer to our customers through acquisitions. Since December 31, 2008, we have acquired two public companies (Eveready Inc., or "Eveready," in July 2009, and Peak Energy Services Ltd., or "Peak," in June 2011) and 15 private companies (including six private companies acquired during 2010, 2011 and 2012). The largest was our acquisition of Safety-Kleen, Inc., a private company, and its subsidiaries (collectively, “Safety-Kleen”), which we purchased on December 28, 2012 for approximately $1.3 billion. We anticipate that we will likely make additional acquisitions in the future.
 
Much of the potential benefit of such completed and potential future acquisitions, including the recent acquisition of Safety-Kleen, will depend on our integration of the businesses and operations of the acquired companies into our business and operations through implementation of appropriate management and financial reporting systems and controls. We may experience difficulties in such integration, and the integration process may be costly and time-consuming. Such integration will require the focused attention of both Clean Harbors' and their management teams, including a significant commitment of their time and resources. The need for both Clean Harbors' and their managements to focus on integration matters could have a material impact on the revenues and operating results of the combined company. The success of the acquisitions will depend, in part, on the combined company's ability to realize the anticipated benefits from combining the businesses of Clean Harbors and the acquired businesses through cost reductions in overhead, greater efficiencies, increased utilization of support facilities and the adoption of mutual best practices. To realize these anticipated benefits, however, the businesses of Clean Harbors and the acquired companies must be successfully combined.
 
If the combined company is not able to achieve these objectives, the anticipated benefits to us of the acquisitions may not be realized fully or at all or may take longer to realize than expected. It is possible that the integration processes could result in the loss of key employees, as well as the disruption of each company's ongoing businesses, failure to implement the business plan for the combined company, unanticipated issues in integrating operating, logistics, information, communications and other systems, unanticipated changes in applicable laws and regulations, operating risks inherent in our business or inconsistencies in standards, controls, procedures and policies or other unanticipated issues, expenses and liabilities, any or all of which could adversely affect our ability to maintain relationships with our and the acquired companies' customers and employees or to achieve the anticipated benefits of the acquisitions.

Our acquisitions of Safety-Kleen and other companies may expose us to unknown liabilities.
 
Because we have acquired, and expect to acquire, all the outstanding common shares of most of our acquired companies, including our acquisition in December 2012 of all of the outstanding shares of Safety-Kleen, Inc., our investment in those companies are or will be subject to all of their liabilities other than their respective debts which we paid or will pay at the time of the acquisitions. If there are unknown liabilities or other obligations, including contingent liabilities, arising from our acquisitions of Safety-Kleen and other companies, our business could be materially affected. We may learn additional information about Safety-Kleen and the other acquired companies that adversely affects us, such as unknown liabilities or other issues relating to internal controls over financial reporting, issues that could affect our ability to comply with the Sarbanes-Oxley Act or issues that could affect our ability to comply with other applicable laws.
 
Risks Particularly Affecting Our Environmental Services Business
We assumed significant environmental liabilities as part of our past acquisitions and may assume additional such liabilities as part of future acquisitions. Our financial condition, results of operations and cash flows would be adversely affected if we were required to pay such liabilities more rapidly or in greater amounts than we now estimate or may estimate in connection with future acquisitions.
We have accrued environmental liabilities valued as of December 31, 2012, at $221.5 million, substantially all of which we assumed in connection with our acquisitions of substantially all of the assets of the Chemical Services Division, or "CSD," of Safety-Kleen Corp. in 2002, Teris LLC in 2006, one of two solvent recycling facilities we purchased from Safety-Kleen Services, Inc. in 2008, and the remaining Safety-Kleen facilities acquired as part of our acquisition of Safety-Kleen in 2012. We calculate our environmental liabilities on a present value basis in accordance with generally accepted accounting principles, which take into consideration both the amount of such liabilities and the timing when it is projected that we will be required to pay such liabilities. We anticipate our environmental liabilities will be payable over many years and that cash flows generated from our operations will generally be sufficient to fund the payment of such liabilities when required. However, events not now anticipated (such as future changes in environmental laws and regulations or their enforcement) could require that such

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payments be made earlier or in greater amounts than now estimated, which could adversely affect our financial condition and results of operations.
We may also assume additional environmental liabilities as part of further acquisitions. Although we will endeavor to accurately estimate and limit environmental liabilities presented by the businesses or facilities to be acquired, some liabilities, including ones that may exist only because of the past operations of an acquired business or facility, may prove to be more difficult or costly to address than we then estimate. It is also possible that government officials responsible for enforcing environmental laws may believe an environmental liability is more significant than we then estimate, or that we will fail to identify or fully appreciate an existing liability before we become legally responsible to address it.
If we are unable to obtain at reasonable cost the insurance, surety bonds, letters of credit and other forms of financial assurance required for our facilities and operations, our business and results of operations would be adversely affected.
We are required to provide substantial amounts of financial assurance to governmental agencies for closure and post-closure care of our licensed hazardous waste treatment facilities should those facilities cease operation, and we are also occasionally required to post surety, bid and performance bonds in connection with certain projects. As of December 31, 2012, our total estimated closure and post-closure costs requiring financial assurance by regulators (other than for Safety-Kleen's facilities acquired as part of our acquisition of Safety-Kleen on December 28, 2012) were $343.1 million for our U.S. facilities and $22.4 million for our Canadian facilities. We have obtained all of the required financial assurance for our facilities (other than those acquired as part of the Safety-Kleen acquisition) from a qualified insurance company, Zurich Insurance N.A., and its affiliated companies. The closure and post-closure obligations of our U.S. facilities (other than those acquired as part of the Safety-Kleen acquisition) are insured by an insurance policy written by Steadfast Insurance Company (a unit of Zurich Insurance N.A.), which will expire in 2013. Our Canadian facilities (other than those acquired as part of the Safety-Kleen acquisition) utilize surety bonds provided through Zurich Insurance Company (Canada), which expire at various dates throughout 2013. In connection with obtaining such insurance and surety bonds, we have provided to Steadfast Insurance Company $73.5 million of letters of credit which we obtained from our lenders under our revolving credit agreement.
As of December 31, 2012, Safety-Kleen’s total estimated closure, post-closure costs and corrective action costs requiring financial assurance by regulators were $46.8 million for Safety-Kleen’s U.S. facilities and $5.3 million for Safety-Kleen’s Canadian facilities. Safety-Kleen has obtained all of the required U.S. financial assurance for its facilities from a qualified insurance company, XL Insurance Company, and its affiliated companies, which will expire in 2013, except for Safety-Kleen’s Pennsylvania facilities which utilize letters of credit. In connection with obtaining such insurance for its U.S. facilities, Safety-Kleen has provided to XL Insurance Company a $5.0 million letter of credit which Safety-Kleen obtained from its lenders under its revolving credit agreement. Safety-Kleen’s Canadian facilities utilize surety bonds provided through Travelers Insurance Company (Canada), which will expire in 2014, and letters of credit.
Our ability to continue operating our facilities and conducting our other operations would be adversely affected if we became unable to obtain sufficient insurance, surety bonds, letters of credit and other forms of financial assurance at reasonable cost to meet our regulatory and other business requirements. The availability of insurance, surety bonds, letters of credit and other forms of financial assurance is affected by our insurers', sureties' and lenders' assessment of our risk and by other factors outside of our control such as general conditions in the insurance and credit markets.
The environmental services industry in which we participate is subject to significant economic and business risks.
The future operating results of our environmental services business may be affected by such factors as our ability to utilize our facilities and workforce profitably in the face of intense price competition, maintain or increase market share in an industry which has experienced significant downsizing and consolidation, realize benefits from cost reduction programs, generate incremental volumes of waste to be handled through our facilities from existing and acquired sales offices and service centers, obtain sufficient volumes of waste at prices which produce revenue sufficient to offset the operating costs of the facilities, minimize downtime and disruptions of operations, and develop our field services business. In particular, economic downturns or recessionary conditions in North America, and increased outsourcing by North American manufacturers to plants located in countries with lower wage costs and less stringent environmental regulations, have adversely affected and may in the future adversely affect the demand for our services. Our hazardous and industrial waste management business is also cyclical to the extent that it is dependent upon a stream of waste from cyclical industries such as the chemical and petrochemical, primary metals, paper, furniture and aerospace industries. If those cyclical industries slow significantly, the business that we receive from those industries is likely to slow.
A significant portion of our environmental services business depends upon the demand for cleanup of major spills and other remedial projects and regulatory developments over which we have no control.
Our operations are significantly affected by the commencement and completion of cleanup of major spills and other events, customers' decisions to undertake remedial projects, seasonal fluctuations due to weather and budgetary cycles

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influencing the timing of customers' spending for remedial activities, the timing of regulatory decisions relating to hazardous waste management projects, changes in regulations governing the management of hazardous waste, secular changes in the waste processing industry towards waste minimization and the propensity for delays in the demand for remedial services, and changes in the myriad of governmental regulations governing our diverse operations. We do not control such factors and, as a result, our revenue and income can vary significantly from quarter to quarter, and past financial performance for certain quarters may not be a reliable indicator of future performance for comparable quarters in subsequent years. In particular, our participation in oil spill response efforts in Yellowstone, Montana generated third party revenues for the year ended December 31, 2011 of $43.6 million, which accounted for approximately 2% of total revenues, and our participation in oil spill response efforts in both the Gulf of Mexico and Michigan generated third party revenues for the year ended December 31, 2010 of $253.0 million, which accounted for approximately 15% of total revenues. We cannot expect such event revenue to reoccur in 2013.
The extensive environmental regulations to which we are subject may increase our costs and potential liabilities and limit our ability to expand our facilities.
Our operations and those of others in the environmental services industry are subject to extensive federal, state, provincial and local environmental requirements in both the United States and Canada, including those relating to emissions to air, discharged wastewater, storage, treatment, transport and disposal of regulated materials and cleanup of soil and groundwater contamination. For example, any failure to comply with governmental regulations governing the transport of hazardous materials could negatively impact our ability to collect, process and ultimately dispose of hazardous wastes generated by our customers. While increasing environmental regulation often presents new business opportunities for us, it often also results in increased operating and compliance costs. Efforts to conduct our operations in compliance with all applicable laws and regulations, including environmental rules and regulations, require programs to promote compliance, such as training employees and customers, purchasing health and safety equipment, and in some cases hiring outside consultants and lawyers. Even with these programs, we and other companies in the environmental services industry are routinely faced with governmental enforcement proceedings, which can result in fines or other sanctions and require expenditures for remedial work on waste management facilities and contaminated sites. Certain of these laws impose strict and, under certain circumstances, joint and several liability on current and former owners and operators of facilities that release regulated materials or that generate those materials and arrange for their disposal or treatment at contaminated sites. Such liabilities can relate to required cleanup of releases of regulated materials and related natural resource damages.
From time to time, we have paid fines or penalties in governmental environmental enforcement proceedings, usually involving our waste treatment, storage and disposal facilities. Although none of these fines or penalties that we have paid in the past has had a material adverse effect upon us, we might in the future be required to make substantial expenditures as a result of governmental proceedings which would have a negative impact on our earnings. Furthermore, regulators have the power to suspend or revoke permits or licenses needed for operation of our plants, equipment, and vehicles based on, among other factors, our compliance record, and customers may decide not to use a particular disposal facility or do business with us because of concerns about our compliance record. Suspension or revocation of permits or licenses would impact our operations and could have a material impact on our financial results. Although we have never had any of our facilities' operating permits revoked, suspended or non-renewed involuntarily, it is possible that such an event could occur in the future.
Some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. In the past, practices have resulted in releases of regulated materials at and from certain of our facilities, or the disposal of regulated materials at third party sites, which may require investigation and remediation, and potentially result in claims of personal injury, property damage and damages to natural resources. In addition, we occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities might trigger compliance requirements that are not applicable to operating facilities. We are currently conducting remedial activities at certain of our facilities and paying a portion of the remediation costs at certain sites owned by third parties. While, based on available information, we do not believe these remedial activities will result in a material effect upon our operations or financial condition, these activities or the discovery of previously unknown conditions could result in material costs.
In addition to the costs of complying with environmental laws and regulations, we incur costs defending against environmental litigation brought by governmental agencies and private parties. We are now, and may in the future be, a defendant in lawsuits brought by parties alleging environmental damage, personal injury, and/or property damage, which may result in our payment of significant amounts of liabilities.
Environmental and land use laws also impact our ability to expand our facilities. In addition, we are required to obtain governmental permits to operate our facilities, including all of our landfills. Even if we were to comply with all applicable environmental laws, there is no guarantee that we would be able to obtain the requisite permits from the applicable

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governmental authorities, and, even if we could, that permit (and any existing permits we currently hold) will be extended or modified as needed to fit out business needs.
Future changes in environmental regulations may require us to make significant capital expenditures.
Changes in environmental regulations can require us to make significant capital expenditures for our facilities. For example, in 2002, the United States Environmental Protection Agency, or "EPA," promulgated Interim Standards of the Hazardous Waste Combustor Maximum Achievable Control Technology, or "MACT," under the Federal Clean Air Act Amendments. These standards established new emissions limits and operational controls on all new and existing incinerators, cement kilns and light-weight aggregate kilns that burn hazardous waste-derived fuels. We have spent approximately $29.6  million since September 7, 2002 in order to bring our Deer Park, Texas and Aragonite, Utah incineration facilities, which we then acquired as part of the CSD assets, and our Kimball, Nebraska facility into compliance with the MACT regulations. Prior to our acquisition in August 2006 of our additional incineration facility in El Dorado, Arkansas, as part of our purchase of all the membership interests in Teris LLC, Teris had spent in excess of $30.0 million in order to bring that facility into compliance with the MACT standards. Future environmental regulations could cause us to make significant additional capital expenditures and adversely affect our results of operations and cash flow.
If our assumptions relating to expansion of our landfills should prove inaccurate, our results of operations and cash flow could be adversely affected.
When we include expansion airspace in our calculation of available airspace, we adjust our landfill liabilities to the present value of projected costs for cell closure and landfill closure and post-closure. It is possible that any of our estimates or assumptions could ultimately turn out to be significantly different from actual results. In some cases we may be unsuccessful in obtaining an expansion permit or we may determine that an expansion permit that we previously thought was probable has become unlikely. To the extent that such estimates, or the assumptions used to make those estimates, prove to be significantly different than actual results, or our belief that we will receive an expansion permit changes adversely in a significant manner, the landfill assets, including the assets incurred in the pursuit of the expansion, may be subject to impairment testing and lower prospective profitability may result due to increased interest accretion and depreciation or asset impairments related to the removal of previously included expansion airspace. In addition, if our assumptions concerning expansion airspace should prove inaccurate, certain of our cash expenditures for closure of landfills could be accelerated and adversely affect our results of operations and cash flow.
Risks Particularly Affecting Our Energy and Industrial Services Business
A large portion of our energy and industrial services business is dependent on the oil and gas industry in Western Canada, and declines in oil and gas exploration and production in that region could adversely affect our business.
Our energy and industrial services business generates well over 50% of its total revenues from customers in the oil and gas industry operating in Western Canada, although a majority of the services we provide to such customers relate to industrial maintenance and oil and gas production and refining which are less volatile than oil and gas exploration. We also provide significant services to customers in the oil and gas industry operating in the United States or internationally and to customers in other industries such as forestry, mining and manufacturing. However, a major portion of the total revenues of our energy and industrial services business remains dependent on customers in the oil and gas industry operating in Western Canada.
Accordingly, declines in the general level of oil and gas exploration, production and refining in Western Canada could potentially have significant adverse effects on our total revenues and profitability. Such declines occurred in 2008-2009 and could potentially occur in the future if reductions in the commodity prices of oil and gas result in reduced oil and gas exploration, production and refining. Such future declines could also be triggered by technological and regulatory changes, such as those affecting the availability and cost of alternative energy sources, and other changes in industry and worldwide economic and political conditions.
Many of our major customers in the oil and gas industry conduct a significant portion of their operations in the Alberta oil sands. The Alberta oil sands contain large oil deposits, but extraction may involve significantly greater cost and environmental concerns than conventional drilling. While we believe our major involvement in the oil sands region will provide significant future growth opportunities, such involvement also increases the risk that our business will be adversely affected if future economic activity in the Alberta oil sands were to decline considerably. Major factors that could cause such a decline might include a prolonged reduction in the commodity price of oil, future changes in environmental restrictions and regulations, and technological and regulatory changes relating to production of oil from the oil sands. Due to the downturn in worldwide economic conditions and in the commodity price of oil and gas which occurred in 2008-2009, certain of our customers delayed a number of large projects in the planning and early development phases within the oil sands region. In addition, customers are revisiting their operating budgets and challenging their suppliers to reduce costs and achieve better efficiencies in their work programs.

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Our energy and industrial services business is subject to workforce availability.
Our ability to provide high quality services to our customers is dependent upon our ability to attract and retain well-trained, experienced employees. Prior to 2008, the oil and gas services industry in Western Canada experienced for several years high demand for, and a corresponding shortage of, quality employees resulting, in particular, in employment of a significant number of employees from Eastern Canada on a temporary basis. Although the 2008-2009 downturn in the oil and gas industry increased the pool of quality employees available to meet our customer commitments, the subsequent improvement during 2010-2011 of conditions in the oil and gas industry has increased, and any such improvement which may occur in the future would likely increase, competition for experienced employees.
Additional Risks Relating to Our Recent Acquisition of Safety-Kleen
In addition to the risks described above which are applicable to our environmental services and energy and industrial services businesses (as those businesses were expanded by our acquisition of Safety-Kleen on December 28, 2012), our acquisition of Safety-Kleen resulted in our becoming subject to certain additional risks, including in the particular the following:
Safety-Kleen’s revenues are relatively concentrated among a small number of its largest customers.
In 2012, Safety-Kleen’s ten largest customers accounted for approximately 24% of its total revenues and its largest customer accounted for approximately 7% of its total revenues. If one or more of Safety-Kleen’s significant customers were to cease doing business with Safety-Kleen or significantly reduce or delay the purchase of products or services from it, our business, financial condition and results of operations could be materially and adversely affected. In addition, Safety-Kleen is subject to credit risk associated with the concentration of its accounts receivable from its customers. None of Safety-Kleen’s accounts receivable are covered by collateral or credit insurance. If one or more of its significant customers or if any material portion of Safety-Kleen’s other customers were to fail to pay Safety-Kleen on a timely basis, our business, financial condition and results of operations could be materially and adversely affected. Additionally, future consolidation of Safety-Kleen’s customers or additional concentration of market share among its customers may increase its credit risk.

Fluctuations in oil prices may have a negative effect on Safety-Kleen’s future results of operations derived from its oil re-refining and recycling business.
A significant portion of Safety-Kleen’s business involves collecting used oil from certain of its customers, re-refining a portion of such used oil into base and blended lubricating oils, and then selling both such re-refined oil and the excess recycled oil which Safety-Kleen does not currently have the capacity to re-refine, or ‘‘RFO,’’ to other customers. The prices at which Safety-Kleen sells its re-refined oil and RFO are affected by changes in the reported spot market prices of oil. If applicable rates increase or decrease, Safety-Kleen typically will charge a higher or lower corresponding price for its re-refined oil and RFO. The price at which Safety-Kleen sells its re-refined oil and RFO is affected by changes in certain indices measuring changes in the price of heavy fuel oil, with increases and decreases in the indices typically translating into a higher or lower price for Safety-Kleen’s RFO. The cost to collect used oil, including the amounts Safety-Kleen must pay to obtain used oil and the fuel costs of its oil collection fleet, typically also increases or decreases when the relevant indices increase or decrease. However, even though the prices Safety-Kleen can charge for its re-refined oil and RFO and the costs to collect and re-refine used oil and process RFO typically increase and decrease together, there is no assurance that when Safety-Kleen’s costs to collect and re-refine used oil and process RFO increase it will be able to increase the prices it charges for its re-refined oil and RFO to cover such increased costs or that the costs to collect and re-refine used oil and process RFO will decline when the prices it can charge for re-refined oil and RFO decline. These risks are exacerbated when there are rapid fluctuations in these oil indices.
The price at which Safety-Kleen purchases used oil from its large customers through its oil collection services is generally fixed for a period of time by contract, in some cases for up to 90 days. Because the price Safety-Kleen pays for a majority of its used oil is fixed for a period of time and it can take up to eight weeks to transport, re-refine and blend collected used oil into Safety-Kleen’s finished blended lubricating oil products, Safety-Kleen typically experiences margin contraction during periods when the applicable index rates decline. If the index rates decline rapidly, Safety-Kleen may be locked into paying higher than market prices for used oil during these contracted periods while the prices it can charge for its finished oil products decline. If the prices Safety-Kleen charges for its finished oil products and the costs to collect and re-refine used oil and process RFO do not move together or in similar magnitudes, Safety-Kleen’s profitability may be materially and negatively impacted.
Safety-Kleen has entered into several commodity derivatives since 2011, which are comprised of cashless collar contracts related to crude oil prices, in each case, where Safety-Kleen sold a call option to a bank and then purchased a put option from the same bank, in order to manage against significant fluctuations in crude oil prices, which are closely correlated with indices

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discussed above. However, these commodity derivatives are designed to only mitigate Safety-Kleen’s exposure to declines in these oil indices below a price floor, and Safety-Kleen will not be protected and its profitability may be materially and negatively impacted by declines above the price floor. In addition, these commodity derivatives will limit Safety-Kleen’s potential benefit when these oil indices increase above a price cap because Safety-Kleen will be required to make payments in that circumstance. Furthermore, Safety-Kleen’s current commodity derivatives expire at various intervals, and there is no assurance that we will be able to enter into commodity derivatives in the future with acceptable terms.
Environmental laws and regulations have adversely affected and may adversely affect Safety-Kleen's parts cleaning and other solvent related services.
In connection with its parts cleaning and other solvent related services, Safety-Kleen has been subject to fines and certain orders requiring it to take environmental remedial action. In fiscal years 2012 and 2011, Safety-Kleen paid a total of approximately $365,000 and $190,000, respectively, for such fines, including fines arising in previous years. In 2009, Safety-Kleen recorded as an expense a $15.0 million settlement with the South Coast Air Quality Management District, or ‘‘SCAQMD,’’ in southern California and other regulatory agencies for alleged civil violations of SCAQMD Rule 1171, which prohibits the use of solvent, except for certain exempt uses, in the district. Safety-Kleen paid this settlement and is currently in compliance with SCAQMD Rule 1171. However, in the future, Safety-Kleen may be subject to monetary fines, civil or criminal penalties, remediation, cleanup or stop orders, injunctions, orders to cease or suspend certain practices or denial of permits required for the operation of its facilities. The outcome of any proceeding and associated costs and expenses could have a material adverse impact on Safety-Kleen’s financial condition and results of operations.
Recent and potential changes in environmental laws and regulations may also adversely affect in the future Safety-Kleen's parts cleaning and other solvent related services. In particular, there has been a regulatory-driven shift away from solvents having higher volatile organic compounds, or ‘‘VOC,’’ as evidenced by the recent move of the Ozone Transport Commission representing several states to reduce the VOC limits for various products, including solvent used for parts cleaning or with paint-gun cleaning equipment. Interpretation or enforcement of existing laws and regulations, or the adoption of new laws and regulations, may require Safety-Kleen to modify or curtail its operations or replace or upgrade its facilities or equipment at substantial costs, which we may not be able to pass on to our customers, and we may choose to indemnify our customers from any fines or penalties they may incur as a result of these new laws and regulations. On the other hand, in some cases if new laws and regulations are less stringent, Safety-Kleen’s customers or competitors may be able to manage waste more effectively themselves, which could decrease the need for Safety-Kleen’s services or increase competition, which could adversely affect Safety-Kleen’s results of operations.

Safety-Kleen is subject to existing and potential product liability lawsuits.

Safety-Kleen has been named as a defendant in various product liability lawsuits in various courts and jurisdictions throughout the United States from time to time. As of December 31, 2012, Safety-Kleen was involved in approximately 64 proceedings (including cases which have been settled but not formally dismissed) wherein persons claimed personal injury resulting from the use of its parts cleaning equipment or cleaning products. These proceedings typically involve allegations that the solvent used in Safety-Kleen’s parts cleaning equipment contains contaminants 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 warn adequately 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. Although Safety-Kleen maintains insurance that we believe will provide coverage for these claims (over amounts accrued for self-insured retentions and deductibles in certain limited cases), this insurance may not provide coverage for potential awards of punitive damages against Safety-Kleen. Although Safety-Kleen vigorously defends itself and the safety of its products against all of these claims (and we intend to continue defending these claims), these matters are subject to many uncertainties and outcomes are not predictable with assurance. Safety-Kleen may also be named in similar, additional lawsuits in the future, including claims for which insurance coverage may not be available. If one or more of these claims is decided unfavorably against Safety-Kleen and the plaintiffs are awarded punitive damages, or if the claim is one for which insurance coverage may not be available, our financial condition and results of operations could be materially and adversely affected. Additionally, if one or more of these claims were decided unfavorably against Safety-Kleen, such outcome may encourage even more lawsuits against us.

Safety-Kleen is dependent on third parties for the manufacturing of the majority of its equipment.

Safety-Kleen does not manufacture the majority of the equipment, including parts washers, that Safety-Kleen places at customer sites. Accordingly, Safety-Kleen relies on a limited number of third party suppliers for manufacturing this equipment. The supply of third party equipment could be interrupted or halted by a termination of Safety-Kleen’s relationships, a failure of quality control or other operational problems at such suppliers or a significant decline in their financial condition. If Safety-Kleen is not able to retain these providers or obtain its requests from these providers, Safety-Kleen may not be able to obtain

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alternate providers in a timely manner or on economically attractive terms, and as a result, Safety-Kleen may not be able to compete successfully for new business, complete existing engagements profitably or retain its existing customers. Additionally, if Safety-Kleen’s third party suppliers provide it with defective equipment, it may be subject to reputational damage or product liability claims which may negatively impact its reputation, financial condition and results of operations. Further, Safety-Kleen generally does not have long term contracts with its third party suppliers, and as a result these suppliers may increase the price of the equipment they provide to Safety-Kleen, which may hurt Safety-Kleen’s results of operations.
Risks Relating to Our Level of Debt, Letters of Credit and Senior Unsecured Notes
Our substantial levels of outstanding debt and letters of credit could adversely affect our financial condition and ability to fulfill our obligations.
As of December 31, 2012, we had outstanding $1.4 billion of senior unsecured notes and $132.6 million of letters of credit (which total includes $46.0 million of back-up letters of credit we obtained under our revolving credit facility in connection with our December 28, 2012 acquisition of Safety-Kleen). Our substantial levels of outstanding debt and letters of credit may:
adversely impact our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes or to repurchase the notes from holders upon any change of control;

require us to dedicate a substantial portion of our cash flow to the payment of interest on our debt and fees on our letters of credit, which reduces the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;

subject us to the risk of increased sensitivity to interest rate increases based upon variable interest rates, including borrowings (if any) under our revolving credit facility;

increase the possibility of an event of default under the financial and operating covenants contained in our debt instruments; and

limit our ability to adjust to rapidly changing market conditions, reduce our ability to withstand competitive pressures and make us more vulnerable to a downturn in general economic conditions of our business than our competitors with less debt.
Our ability to make scheduled payments of principal or interest with respect to our debt, including our outstanding notes, any revolving loans and our capital leases, and to pay fee obligations with respect to our letters of credit, will depend on our ability to generate cash and on our future financial results. If we are unable to generate sufficient cash flow from operations in the future to service our debt and letter of credit fee obligations, we might be required to refinance all or a portion of our existing debt and letter of credit facilities or to obtain new or additional such facilities. However, we might not be able to obtain any such new or additional facilities on favorable terms or at all.
Despite our substantial levels of outstanding debt and letters of credit, we could incur substantially more debt and letter of credit obligations in the future.
Although our revolving credit agreement and the indentures governing the notes contain restrictions on the incurrence of additional indebtedness (including, for this purpose, reimbursement obligations under outstanding letters of credit), these restrictions are subject to a number of qualifications and exceptions and the additional amount of indebtedness which we might incur in the future in compliance with these restrictions could be substantial. In particular, we had available at December 31, 2012 up to an additional approximately $117.4 million for purposes of additional borrowings and letters of credit, and on January 17, 2013 we increased our $250.0 million revolving credit facility to a $400.0 million revolving credit facility, thereby increasing our approximately $117.4 million of availability at December 31, 2012 to approximately $267.4 million. The revolving credit agreement and the indentures governing our outstanding notes also allow us to borrow significant amounts of money from other sources. These restrictions would also not prevent us from incurring obligations (such as operating leases) that do not constitute “indebtedness” as defined in the relevant agreements. To the extent we incur in the future additional debt and letter of credit obligations, the related risks will increase.

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The covenants in our debt agreements restrict our ability to operate our business and might lead to a default under our debt agreements.
Our revolving credit agreement and the indentures governing our outstanding notes limit, among other things, our ability and the ability of our restricted subsidiaries to:
incur or guarantee additional indebtedness (including, for this purpose, reimbursement obligations under letters of credit) or issue preferred stock;
pay dividends or make other distributions to our stockholders;
purchase or redeem capital stock or subordinated indebtedness;
make investments;
create liens;
incur restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;
sell assets, including capital stock of our subsidiaries;
consolidate or merge with or into other companies or transfer all or substantially all of our assets; and
engage in transactions with affiliates.
As a result of these covenants, we may not be able to respond to changes in business and economic conditions and to obtain additional financing, if needed, and we may be prevented from engaging in transactions that might otherwise be beneficial to us. Our revolving credit facility requires, and our future credit facilities may require, us to maintain certain financial ratios and satisfy certain other financial condition tests. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we may not be able to meet those tests. The breach of any of these covenants could result in a default under our revolving credit facility or future credit facilities. Upon the occurrence of an event of default, the lenders could elect to declare all amounts outstanding under such credit facilities, including accrued interest or other obligations, to be immediately due and payable. If amounts outstanding under such credit facilities were to be accelerated, our assets might not be sufficient to repay in full that indebtedness and our other indebtedness, including the notes.
Our revolving credit agreement and the indentures governing our outstanding notes also contain cross-default and cross-acceleration provisions. Under these provisions, a default or acceleration under one instrument governing our debt may constitute a default under our other debt instruments that contain cross-default and cross-acceleration provisions, which could result in the related debt and the debt issued under such other instruments becoming immediately due and payable. In such event, we would need to raise funds from alternative sources, which funds might not be available to us on favorable terms, on a timely basis or at all. Alternatively, such a default could require us to sell assets and otherwise curtail operations to pay our creditors. The proceeds of such a sale of assets, or curtailment of operations, might not enable us to pay all of our liabilities.
Other Risks Relating to Our Common Stock
The Massachusetts Business Corporation Act and our By-Laws contain certain anti-takeover provisions.
Sections 8.06 and 7.02 of the Massachusetts Business Corporation Act provide that Massachusetts corporations which are publicly-held must have a staggered board of directors and that written demand by holders of at least 40% of the outstanding shares of each relevant voting group of stockholders is required for stockholders to call a special meeting unless such corporations take certain actions to affirmatively "opt-out" of such requirements. In accordance with these provisions, our By-Laws provide for a staggered Board of Directors which consists of three classes of directors of which one class is elected each year for a three-year term, and require that written application by holders of at least 25% (which is less than the 40% which would otherwise be applicable without such a specific provision in our By-Laws) of our outstanding shares of common stock is required for stockholders to call a special meeting. In addition, our By-Laws prohibit the removal by the stockholders of a director except for cause. These provisions could inhibit a takeover of our Company by restricting stockholders' action to replace the existing directors or approve other actions which a party seeking to acquire us might propose. A takeover transaction would frequently afford stockholders an opportunity to sell their shares at a premium over then market prices.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.    PROPERTIES
Our principal executive offices are in Norwell, Massachusetts where approximately 137,000 square feet is leased under arrangements expiring in 2022. There are also regional administrative offices in Texas, South Carolina and Alberta, Canada.

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Our principal property, plant and equipment consist of land, landfill assets and buildings (primarily incinerators, wastewater treatment plants, TSDFs and oil re-refining facilities), vehicles and equipment (including environmental remediation equipment). We have 51 active permitted hazardous waste or nonhazardous waste management properties, two oil re-refining facilities, and other properties more fully described under “Other Facilities and Properties” below. Our most significant properties are our incinerators, landfills and TSDFs which are included in our Technical Services segment and our oil re-refining facilities which we acquired as part of our 2012 acquisition of Safety-Kleen.
Our properties are sufficient and suitable to our needs. The following tables set forth certain information as of December 31, 2012 regarding our properties. Our principal owned operating properties located in the United States are mortgaged as collateral under our revolving credit facility.
Hazardous Waste Management Properties
Included in our 51 active hazardous waste management properties are five incineration locations, nine commercial landfills, seven wastewater treatment plants, 20 TSDFs, two solvent recycling facilities and eight facilities which specialize in PCB management, oil and used oil products recycling. Some of our properties offer multiple capabilities.
Incinerators.    As of December 31, 2012, we owned five operating incineration facilities containing a total of eight incinerators as follows:
 
# of
Incinerators
 
Practical
Capacity
(Tons)
 
Utilization Rate
Year Ended
December 31,
2012
Arkansas
2

 
95,072

 
90.8
%
Nebraska
1

 
58,808

 
76.7
%
Utah
1

 
66,815

 
87.2
%
Texas
3

 
165,500

 
95.1
%
Ontario, Canada
1

 
93,696

 
92.2
%
 
8

 
479,891

 
90.3
%
Our incinerators offer a wide range of technological capabilities to customers through this network. Incineration in the United States is provided by a fluidized bed thermal oxidation unit and three solids and liquids-capable incineration facilities. In Canada, we operate one active hazardous waste liquid injection incinerator. In the fourth quarter of 2011, we temporarily idled for approximately 18 months an additional hazardous waste incinerator which we own in Ville Mercier, Quebec. The incinerator in Ville Mercier is not reflected in the numbers shown above. Factors influencing the decision included additional disposal capacity acquired in 2011, declining local market conditions in Quebec, and our ability to transfer waste streams to our other facilities.
Landfills.    In the United States and Canada, we operate nine commercial landfills as described in the following table:
 
# of
Facilities
 
Remaining Highly
Probable Airspace
(cubic yards,
in thousands)
 
Remaining
Lives
(Years)
California
2

 
10,797

 
29 and 64

Colorado
1

 
2,123

 
42

North Dakota
1

 
2,700

 
11

Oklahoma
1

 
3,323

 
16

Texas
1

 
848

 
13

Utah
1

 
2,130

 
24

Alberta, Canada
1

 
758

 
4

Ontario, Canada
1

 
6,284

 
64

 
9

 
28,963

 
 

Seven of our commercial landfills are designed and permitted for the disposal of hazardous wastes and two landfills are operated for nonhazardous industrial waste disposal and, to a lesser extent, municipal solid waste. In addition to our commercial landfills, we also own and operate two non-commercial landfills that only accept waste from our on-site incinerators. We own all of the landfills with the exception of the landfill in Oklahoma that is leased.

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Wastewater Treatment Plants.    We operate seven facilities that offer a range of wastewater treatment technologies and customer services, as follows:
 
# of
Facilities
 
Owned
 
Leased
Connecticut
1

 
1

 

Louisiana
2

 
1

 
1

Ohio
1

 
1

 

Tennessee
1

 
1

 

Alberta, Canada
1

 

 
1

Ontario, Canada
1

 
1

 

 
7

 
5

 
2

Wastewater treatment consists primarily of three types of services: hazardous wastewater treatment, sludge de-watering or drying, and non-hazardous wastewater treatment.
Treatment, Storage and Disposal Facilities.    We operate 20 TSDFs in the United States and Canada as follows:
 
# of
Facilities
 
Owned
 
Leased
Arizona
1

 
1

 

California
2

 
2

 

Florida
1

 

 
1

Kansas
1

 
1

 

Louisiana
1

 
1

 

Maryland
1

 
1

 

Massachusetts
1

 
1

 

North Carolina
1

 
1

 

Ohio
1

 
1

 

Texas
2

 
2

 

British Columbia, Canada
1

 
1

 

Manitoba, Canada
1

 
1

 

Nova Scotia, Canada
1

 
1

 

Ontario, Canada
3

 
2

 
1

Quebec, Canada
2

 
2

 

 
20

 
18

 
2

Our TSDFs facilitate the movement of materials among our network of service centers and treatment and disposal facilities. Transportation may be accomplished by truck, rail, barge or a combination of modes, with our own assets or in conjunction with third-party transporters. Specially designed containment systems, vehicles and other equipment permitted for hazardous and industrial waste transport, together with drivers trained in transportation skills and waste handling procedures, provide for the movement of customer waste streams.

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PCB Management Facilities and Oil Storage or Recycling Capabilities.    We operate eight facilities specializing in PCB management or providing oil recycling capabilities, as follows:
 
# of
Facilities
 
Owned
 
Leased
California
1

 
1

 

Georgia
1

 
1

 

Kansas
1

 
1

 

Maine
1

 
1

 

Massachusetts
1

 

 
1

Ohio
2

 
1

 
1

Pennsylvania
1

 
1

 

 
8

 
6

 
2

These facilities are the most significant properties relating to our Field Services segment.
Solvent Recycling Operations.    We own two facilities specializing in solvent recovery management in Illinois and Ohio, and also have one solvent recycling operation adjacent to our incineration facility in El Dorado, Arkansas.
Other Facilities and Properties
Service Centers and Satellite Locations.    We operate 173 additional service centers and satellite or support locations, which occasionally move to other locations as operations and space requirements change, of which 25 are owned and 148 are leased.
Safety-Kleen. In addition to the two oil re-refineries mentioned above, as part of the acquisition of Safety-Kleen we also acquired: (i) 155 branches which serve as principal sales and service centers from which we provide parts cleaning services, containerized waste services, oil collection services and other environmental services; ten accumulation centers used for accumulating waste from the branches; nine recycling centers used to recycle used solvent and process other chemicals and waste streams picked up from customers; 19 oil terminals which collect or process used oil prior to delivery to refineries or distribution as RFO; five distribution centers used to distribute new products and redistribute recycled products; and one manufacturing facility used to manufacture parts cleaning machines. The leased properties include 55 branches, two accumulation centers, one recycling center, six oil terminals and three distribution centers. The facilities are located in 45 U.S. states, four Canadian provinces, and Puerto Rico.
We own the two oil re-refineries and refine approximately 160 million gallons per year of used oil into high quality base oils. One refinery is located in East Chicago, Indiana and the other is located in Breslau, Ontario.
Inactive Facilities.    In addition to the active facilities and properties described above, we own a total of 19 properties which are now closed or inactive, most of which were acquired in 2002 as part of the CSD assets due to our assumption of the remediation liabilities associated with such properties or our closure of such sites. The principal inactive facilities are a closed incinerator and landfill in Baton Rouge, Louisiana, closed incinerators in Roebuck, South Carolina, Coffeyville, Kansas and Bridgeport, New Jersey, and closed wastewater treatment facilities in Cleveland, Ohio and Plaquemine, Louisiana. We gave notice to the regulators and stopped accepting wastes at Plaquemine in 2006. Additionally, as noted above, in the fourth quarter of 2011, we temporarily idled for approximately 18 months our hazardous waste incinerator in Ville Mercier, Quebec.
ITEM 3.    LEGAL PROCEEDINGS
See Note 17, "Commitments and Contingencies," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," for a description of legal proceedings.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

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Table Of Contents

PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock
Our common stock trades on the New York Stock Exchange under the symbol CLH. The following table sets forth the high and low sales prices of our common stock for the indicated periods as reported by the New York Stock Exchange. The data included in the following table reflects the retroactive effect of our two-for-one stock split effective July 16, 2011.
2012
High
 
Low
First Quarter
$
71.63

 
$
60.18

Second Quarter
69.25

 
54.03

Third Quarter
61.99

 
47.61

Fourth Quarter
61.72

 
46.94


2011
High
 
Low
First Quarter
$
50.94

 
$
40.28

Second Quarter
53.05

 
46.80

Third Quarter
59.35

 
46.00

Fourth Quarter
64.68

 
45.05

On February 14, 2013, the closing price of our common stock on the New York Stock Exchange was $51.59 and there were 373 stockholders of record of our common stock, excluding stockholders whose shares were held in nominee, or "street," name. We estimate that approximately 34,000 additional stockholders beneficially held the shares in street name on that date.
We have never declared nor paid any cash dividends on our common stock, and we do not intend to pay any dividends on our common stock in the foreseeable future. We intend to retain our future earnings, if any, for use in the operation and expansion of our business and payment of our outstanding debt. In addition, our current credit agreement and indentures limit the amount of cash dividends we could pay on our common stock. See "Liquidity and Capital Resources" under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Performance Graph
The following graph compares the five-year return from investing $100 in each of our common stock, the NYSE Composite Index, and an index of environmental services companies (custom peer group) compiled by CoreData. The environmental services group used by CoreData includes all companies whose listed line-of-business is SIC Code 4953 (refuse systems), and assumes reinvestment of dividends on the ex-dividend date. An index compares relative performance since a particular starting date. In this instance, the starting date was December 31, 2007, when our common stock closed at $25.85 per share.











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COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CLEAN HARBORS, INC.,
NYSE COMPOSITE INDEX, AND CUSTOM PEER GROUP
ASSUMES $100 INVESTED ON JAN. 01, 2008
ASSUMES DIVIDEND REINVESTED
Securities Authorized For Issuance Under Equity Compensation Plans
See Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," for a description of the securities which are authorized for issuance under our equity compensation plans.
Issuer Purchases of Equity Securities
During the fiscal quarter and year ended December 31, 2012, we did not repurchase any of our outstanding common stock or any other securities registered under the Securities Exchange Act of 1934, as amended.
ITEM 6.    SELECTED FINANCIAL DATA
The following summary of consolidated financial information has been derived from the audited consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," of this report and in the annual reports we previously filed with the SEC. This information should be reviewed in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the financial statements and the notes thereto included in Item 8, "Financial Statements and Supplementary Data," of this report.


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For the Year Ended December 31,
 
2012 (1)
 
2011
 
2010
 
2009
 
2008
 
(in thousands except per share amounts)
Income Statement Data:
 
 
 
 
 
 
 
 
 
Revenues
$
2,187,908

 
$
1,984,136

 
$
1,731,244

 
$
1,074,220

 
$
1,030,713

Cost of revenues (exclusive of items shown separately below)
1,540,621

 
1,379,991

 
1,210,740

 
753,483

 
707,820

Selling, general and administrative expenses
273,520

 
254,137

 
205,812

 
163,157

 
159,674

Accretion of environmental liabilities
9,917

 
9,680

 
10,307

 
10,617

 
10,776

Depreciation and amortization
161,646

 
122,663

 
92,473

 
64,898

 
44,471

Income from operations
202,204

 
217,665

 
211,912

 
82,065

 
107,972

Other (expense) income
(802
)
 
6,402

 
2,795

 
259

 
(119
)
Loss on early extinguishment of debt
(26,385
)
 

 
(2,294
)
 
(4,853
)
 
(5,473
)
Interest expense, net
(47,287
)
 
(39,389
)
 
(27,936
)
 
(15,999
)
 
(8,403
)
Income from continuing operations before (benefit) provision for income taxes
127,730

 
184,678

 
184,477

 
61,472

 
93,977

(Benefit) provision for income taxes (2)
(1,944
)
 
57,426

 
56,756

 
26,225

 
36,491

Income from continuing operations
129,674

 
127,252

 
127,721

 
35,247

 
57,486

Income from discontinued operations, net of tax

 

 
2,794

 
1,439

 

Net income
$
129,674

 
$
127,252

 
$
130,515

 
$
36,686

 
$
57,486

Earnings per share: (3)
 
 
 
 
 
 
 
 
 
     Basic
$
2.41

 
$
2.40

 
$
2.48

 
$
0.74

 
$
1.28

     Diluted
$
2.40

 
$
2.39

 
$
2.47

 
$
0.74

 
$
1.26

Cash Flow Data:
 
 
 
 
 
 
 
 
 
Net cash from operating activities
$
324,365

 
$
179,531

 
$
224,108

 
$
93,270

 
$
109,590

Net cash from investing activities
(1,572,636
)
 
(480,181
)
 
(125,687
)
 
(118,391
)
 
(84,515
)
Net cash from financing activities
1,217,868

 
258,740

 
(32,230
)
 
3,584

 
116,795

Other Financial Data:
 
 
 
 
 
 
 
 
 
Adjusted EBITDA (4)
$
373,767

 
$
350,008

 
$
314,692

 
$
157,580

 
$
163,219

 
At December 31,
 
2012 (1)
 
2011
 
2010
 
2009
 
2008
 
(in thousands)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Working capital
$
517,741

 
$
510,126

 
$
446,253

 
$
386,930

 
$
307,679

Goodwill
593,771

 
122,392

 
60,252

 
56,085

 
24,578

Total assets
3,825,806

 
2,085,803

 
1,602,475

 
1,401,068

 
898,336

Long-term obligations (including current portion) (5)
1,407,971

 
538,888

 
278,800

 
301,271

 
53,630

Stockholders' equity (3)
1,432,072

 
900,987

 
780,827

 
613,825

 
429,045

___________________________________________
(1)
Includes Safety-Kleen which was acquired on December 28, 2012 - see Note 3, "Business Combinations," to the consolidated financial statements. Due to the immateriality of the amounts, no revenue, expense, income or loss of Safety-Kleen is included in our results of operations for the year ended December 31, 2012.
(2)
For fiscal year 2012, the benefit includes a decrease in unrecognized tax benefits of $52.4 million as a result of the expiration of statute of limitation periods related to an historical Canadian debt restructure. For fiscal year 2011, the provision includes a decrease in unrecognized tax benefits of $6.5 million of which $5.7 million was due to expiring statute of limitation periods related to an historical Canadian business combination and the remaining $0.8 million was related to the conclusion of examinations with state taxing authorities, the expiration of various state statutes of limitation periods, and a change in estimate of a previous liability. For fiscal year 2010, the provision includes a decrease in unrecognized tax benefits of $14.3 million. Approximately $13.2 million was due to the expiration of statute of limitation periods related to an historical Canadian business combination and the remaining $1.1 million was

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related to the conclusion of examinations with state taxing authorities and the expiration of various state statute of limitation periods.
(3)
We issued: (i) 5.75 million (stock-split adjusted) shares of common stock in April 2008 upon the closing of a public offering for aggregate net proceeds (after deducting the underwriters' discount and offering expenses payable by us) of $173.5 million; (ii) 4.8 million (stock-split adjusted) shares of common stock in July 2009 to the former holders of Eveready common shares as partial consideration for our acquisition of Eveready; and (iii) 6.9 million shares of our common stock in December 2012 upon the closing of a public offering for aggregate net proceeds (after deducting the underwriters’ discount and offering expenses payable by us) of $368.0 million.
Basic and diluted earnings per share based on income from continuing operations for 2010 were $2.43 and 2.42 per share, respectively, and for 2009, they were both $0.71 per share.
(4)
For all periods presented, "Adjusted EBITDA" consists of net income plus accretion of environmental liabilities, depreciation and amortization, net interest expense, and provision for income taxes. We also exclude loss on early extinguishment of debt, other (income) expense, and income from discontinued operations, net of tax as these amounts are not considered part of usual business operations. See below for a reconciliation of Adjusted EBITDA to both net income and net cash provided by operating activities for the specified periods. Our management considers Adjusted EBITDA to be a measurement of performance which provides useful information to both management and investors. Adjusted EBITDA should not be considered an alternative to net income or other measurements under generally accepted accounting principles ("GAAP"). Because Adjusted EBITDA is not calculated identically by all companies, our measurements of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
We use Adjusted EBITDA to enhance our understanding of our operating performance, which represents our views concerning our performance in the ordinary, ongoing and customary course of our operations. We historically have found it helpful, and believe that investors have found it helpful, to consider an operating measure that excludes expenses such as debt extinguishment and related costs relating to transactions not reflective of our core operations.
The information about our operating performance provided by this financial measure is used by our management for a variety of purposes. We regularly communicate Adjusted EBITDA results to our lenders and to our board of directors and discuss with the board our interpretation of such results. We also compare our Adjusted EBITDA performance against internal targets as a key factor in determining cash bonus compensation for executives and other employees, largely because we believe that this measure is indicative of the how the fundamental business is performing and is being managed.
We also provide information relating to our Adjusted EBITDA so that analysts, investors and other interested persons have the same data that we use to assess our core operating performance. We believe that Adjusted EBITDA should be viewed only as a supplement to the GAAP financial information. We also believe, however, that providing this information in addition to, and together with, GAAP financial information permits the foregoing persons to obtain a better understanding of our core operating performance and to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance on a standalone and a comparative basis.
The following is a reconciliation of net income to Adjusted EBITDA for the following periods (in thousands):
 
Year Ended December 31,
 
2012
 
2011
 
2010
 
2009
 
2008
Net income
$
129,674

 
$
127,252

 
$
130,515

 
$
36,686

 
$
57,486

Accretion of environmental liabilities
9,917

 
9,680

 
10,307

 
10,617

 
10,776

Depreciation and amortization
161,646

 
122,663

 
92,473

 
64,898

 
44,471

Other expense (income)
802

 
(6,402
)
 
(2,795
)
 
(259
)
 
119

Loss on early extinguishment of debt
26,385

 

 
2,294

 
4,853

 
5,473

Interest expense, net
47,287

 
39,389

 
27,936

 
15,999

 
8,403

(Benefit) provision for income taxes
(1,944
)
 
57,426

 
56,756

 
26,225

 
36,491

Income from discontinued operations, net of tax

 

 
(2,794
)
 
(1,439
)
 

Adjusted EBITDA
$
373,767

 
$
350,008

 
$
314,692

 
$
157,580

 
$
163,219

    

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The following reconciles Adjusted EBITDA to net cash provided by operating activities for the following years ended December 31 (in thousands):
 
Year Ended December 31,
 
2012
 
2011
 
2010
 
2009
 
2008
Adjusted EBITDA
$
373,767

 
$
350,008

 
$
314,692

 
$
157,580

 
$
163,219

Interest expense, net
(47,287
)
 
(39,389
)
 
(27,936
)
 
(15,999
)
 
(8,403
)
Benefit (provision) for income taxes
1,944

 
(57,426
)
 
(56,756
)
 
(26,225
)
 
(36,491
)
Income from discontinued operations, net of tax

 

 
2,794

 
1,439

 

Allowance for doubtful accounts
1,213

 
759

 
1,043

 
1,006

 
267

Amortization of deferred financing costs and debt discount
1,793

 
1,572

 
2,921

 
1,997

 
1,915

Change in environmental liability estimates
(8,458
)
 
(2,840
)
 
(8,328
)
 
(4,657
)
 
(2,047
)
Deferred income taxes
34,163

 
37,836

 
4,919

 
4,830

 
3,197

Stock-based compensation
7,494

 
8,164

 
7,219

 
968

 
3,565

Excess tax benefit of stock-based compensation
(2,556
)
 
(3,352
)
 
(1,751
)
 
(481
)
 
(3,504
)
Income tax benefits related to stock option exercises
2,546

 
3,347

 
1,739

 
474

 
3,534

Eminent domain compensation

 
3,354

 

 

 

Gain on sale of businesses

 

 
(2,678
)
 

 

Prepayment penalty on early extinguishment of debt
(21,044
)
 

 
(900
)
 
(3,002
)
 
(3,552
)
Environmental expenditures
(11,191
)
 
(11,319
)
 
(10,236
)
 
(8,617
)
 
(14,268
)
Changes in assets and liabilities, net of acquisitions
 
 
 
 
 
 
 
 
 
Accounts receivable
54,373

 
(65,210
)
 
(49,411
)
 
(11,429
)
 
17,221

Inventories and supplies
(12,871
)
 
(11,696
)
 
(3,129
)
 
(14,512
)
 
(4,542
)
Other current assets
9,334

 
(25,065
)
 
(7,421
)
 
15,605

 
10,071

Accounts payable
5,930

 
(8,116
)
 
38,553

 
5,050

 
(17,763
)
Other current liabilities
(64,785
)
 
(1,096
)
 
18,774

 
(10,757
)
 
(2,829
)
Net cash from operating activities
$
324,365

 
$
179,531

 
$
224,108

 
$
93,270

 
$
109,590

(5)
Long-term obligations (including current portion) include borrowings under our current and former revolving credit facilities and capital lease obligations.

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Table Of Contents

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
In addition to historical information, this Management's Discussion and Analysis contains forward-looking statements, which are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans to," "estimates," "projects," or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the section of this report entitled Item 1A, "Risk Factors." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should also carefully review the risk factors described in other documents which we file from time to time with the SEC, including our quarterly reports on Form 10-Q to be filed during 2013.
General
We are a leading provider of environmental, energy and industrial services throughout North America. During 2012, we reported our business in four reportable segments, consisting of:
Technical Services—provides a broad range of hazardous material management services including the packaging, collection, transportation, treatment and disposal of hazardous and non-hazardous waste at Company-owned incineration, landfill, wastewater, and other treatment facilities.
Field Services—provides a wide variety of environmental cleanup services on customer sites or other locations on a scheduled or emergency response basis including tank cleaning, decontamination, remediation, and spill cleanup.
Industrial Services—provides industrial and specialty services, such as high-pressure and chemical cleaning, catalyst handling, decoking, material processing, and industrial lodging services to refineries, chemical plants, oil sands facilities, pulp and paper mills, and other industrial facilities.
Oil and Gas Field Services—provides fluid handling, fluid hauling, production servicing, surface rentals, seismic services, and directional boring services to the energy sector serving oil and gas exploration, production, and power generation.
During the quarter ended March 31, 2012, we re-assigned certain departments among our Technical Services, Field Services, Industrial Services and Oil and Gas Field Services segments to support management reporting changes. We have recast the 2011 and 2010 segment information presented below to conform to our 2012 segmentation reporting.
On December 28, 2012, we acquired 100% of the outstanding common shares of Safety-Kleen, Inc. for approximately $1.3 billion (see Recent Developments below). Prior to the acquisition, Safety-Kleen and its wholly-owned subsidiaries (collectively, "Safety-Kleen") reported its business in two reportable segments, consisting of:
Oil Re-Refining Services—processes used oil at two owned and operated oil re-refineries into high quality base and blended lubricating oils, which are then sold to third party customers.
Environmental Services—provides a broad range of environmental services, such as parts cleaning, containerized waste services, oil collection, recycling of oil in excess of current re-refining capacity into recycled fuel oil which is then sold to third parties, and other complimentary products and services, including vacuum services, allied products, total project management and other environmental services.
As stated in Item 8, "Financial Statements and Supplementary Data," no revenue, expense, income or loss of Safety-Kleen is included in our consolidated results of operations for the year ended December 31, 2012 due to the immateriality of the operating results subsequent to the December 28, 2012 acquisition date. Safety-Kleen's balance sheet amounts have been reported in total for purposes of our consolidated balance sheet and the segment disclosures as of December 31, 2012. With the acquisition, we are reviewing our consolidated operations and organizational structure on a go forward basis. We expect to adjust our reportable segments and reporting units in the first quarter of our 2013 fiscal year after completion of our review.

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Recent Developments
Acquisition of Safety-Kleen
On December 28, 2012, we acquired 100% of the outstanding common shares of Safety-Kleen, Inc. for approximately $1.3 billion. The purchase price consisted of an all-cash purchase price of $1.25 billion, plus a $7.3 million adjustment for the amount by which the estimated net working capital (excluding cash) of Safety-Kleen, Inc. and its subsidiaries (collectively "Safety-Kleen") on the closing date exceeded $50.0 million. The purchase price is subject to adjustment upon finalization of Safety-Kleen's net working capital balance (excluding cash) as of the closing date. We financed the purchase through a combination of approximately $300.0 million of existing cash, $369.5 million in net proceeds from our public offering of 6.9 million shares of our common stock, and approximately $589.0 million in net proceeds from our private debt offering of $600.0 million of 5.125% senior unsecured notes due 2021. Safety-Kleen, headquartered in Richardson, Texas, is the largest re-refiner and recycler of used oil in North America and a leading provider of parts cleaning and environmental services to commercial, industrial and automotive customers. In conjunction with the transaction, Safety-Kleen, Inc. and its subsidiaries became wholly-owned subsidiaries of Clean Harbors. We acquired Safety-Kleen because we believe Safety-Kleen is a good strategic fit, enabling us to (i) penetrate the small quantity waste generator market, (ii) broaden our waste treatment capabilities to include re-refining waste oil and expanded recycling capabilities, (iii) drive a substantial increase in waste volumes into our existing waste disposal treatment network, (iv) capitalize on the growing demand for recycled products including re-refined oil, (v) enhance our commitment to sustainability, (vi) leverage the combined sales forces to maximize cross-selling opportunities, (vii) add an immediately accretive (exclusive of transaction costs) business to accelerate growth, (viii) leverage operating efficiencies through the combined company and (ix) add to our cash flow.
Public Offering of 6.9 Million Common Shares

On December 3, 2012, we issued 6.9 million shares of our common stock, including 900,000 shares of common stock issued upon exercise of the underwriters' option, at a public offering price of $56.00 per share. After deducting the underwriter discount and offering expenses, we received net proceeds of $369.5 million from the issuance which we used to pay a portion of the purchase price to acquire Safety-Kleen on December 28, 2012.

$600.0 Million Private Debt Offering
On December 7, 2012, we issued through a private placement $600.0 million aggregate principal amount of 5.125% senior unsecured notes due 2021 ("2021 Notes").  The 2021 Notes bear interest at a rate of 5.125% per annum and mature on June 1, 2021. Interest is payable semi-annually on June 1 and December 1 of each year, commencing on June 1, 2013. We may redeem some or all of the 2021 Notes before maturity at stated redemption prices. See Note 11, "Financing Arrangements," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," for a more detailed description of the 2021 Notes. After deducting the initial purchasers' discount and offering expenses, we received net proceeds of approximately $589.0 million from the issuance which we used to pay a portion of the purchase price to acquire Safety-Kleen on December 28, 2012.
$800.0 Million Private Debt Offering
On July 30, 2012, we issued $800.0 million aggregate principal amount of 5.25% senior unsecured notes due 2020 (“2020 Notes”). The 2020 Notes bear interest at a rate of 5.25% per annum and mature on August 1, 2020. Interest is payable semi-annually on August 1 and February 1 of each year, commencing on February 1, 2013. We may redeem some or all of the 2020 Notes before maturity at stated redemption prices. See Note 11, “Financing Arrangements,” to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," for a more detailed description of the 2020 Notes. After deducting the initial purchaser's discount and offering expenses, we received net proceeds of $752.8 million from the issuance, of which we used $490.0 million to finance the purchase and redemption of all of the then outstanding $490.0 million aggregate principal amount of our 7.625% senior secured notes, with the remaining net proceeds used to finance our 2012 acquisitions and for general corporate purposes.
Revolving Credit Facility
On January 17, 2013, we increased our previous $250.0 million revolving credit facility to a $400.0 million revolving credit facility as described further in Note 11, "Financing Arrangements," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data."
Other 2012 Acquisitions
We acquired (i) during the second quarter of 2012, all of the outstanding stock of a privately owned Canadian company which provides workforce accommodations, camp catering and fresh food services; (ii) during the third quarter of 2012, certain

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assets of a privately owned U.S. company that is engaged in the business of materials handling services that includes a variety of support equipment to provide customers with a sole source for any dredging and dewatering project; and (iii) during the fourth quarter of 2012, the shares and assets of certain subsidiaries of a privately owned company that is engaged in the business of providing catalyst loading and unloading services in the United States and Canada. The combined purchase price for these acquisitions was approximately $107.5 million, including the assumption and payment of debt of $7.7 million and post-closing adjustments of $0.7 million based upon the assumed target amounts of working capital.
Summary of Operations
During the year ended December 31, 2012, our revenues increased 10% to $2.19 billion compared with $1.98 billion during the year ended December 31, 2011. Revenues for the year ended December 31, 2012 included our emergency response efforts related to Hurricane Sandy of approximately $11.7 million. Revenues for the prior year included revenue from our emergency response efforts related to the Yellowstone River oil spill in Montana of $43.6 million.
Our Field Services revenues accounted for 11% of our total revenues for the year ended December 31, 2012. Exclusive of our emergency response efforts during the years ended December 31, 2012 and 2011, the year-over-year increase in Field Services revenues of approximately 5% resulted primarily from large-scale project work and ongoing maintenance work.
Our Technical Services revenues accounted for 43% of our total revenues for the year ended December 31, 2012. In our Technical Services segment, we achieved year-over-year revenue growth of 6%. Incinerator utilization was 90% for the year ended December 31, 2012, compared to 89% in 2011, and landfill volumes increased 58% year-over-year.
Our Industrial Services revenues accounted for 26% of our total revenues for the year ended December 31, 2012. The year-over-year increase in revenue of 24% was primarily due to continued investment in the oil sands region of Canada, incremental revenues from refinery turnaround work, revenues associated with our acquisitions, and high utilization rates at the camps in our lodging business.
Our Oil and Gas Field Services revenues accounted for 20% of our total revenues for the year ended December 31, 2012. The year-over-year increase of 16% was primarily due to contributions from our acquisitions.
Our costs of revenues increased from $1.38 billion for the year ended December 31, 2011 to $1.54 billion for the year ended December 31, 2012 primarily due to costs associated with our acquisitions in 2012 and 2011 and because of our increased revenues.  Our gross profit margin was 29.6% for the year ended December 31, 2012, which is down slightly from 30.4% in the same period last year.  
Environmental Liabilities
The net reductions in our estimated environmental liabilities during each of 2012, 2011 and 2010 were due primarily to changes in estimates. The benefits over the past few years were primarily due to the successful introduction of new technology for remedial activities, favorable results from environmental studies of the on-going remediation, including favorable regulatory approvals, and lower project costs realized by utilizing internal labor and equipment. The principal changes in estimates were from the following items:
In 2012, the net reduction of $8.5 million primarily related to five sites. Updates to the scope of future work at two sites led to a reduction in the related remedial liabilities; and installation of new technology at a third site and favorable environmental studies at a fourth site also led to a reduction in remedial liabilities. The estimated savings from these four sites were partially offset by an increase in non-landfill retirement liabilities of $1.1 million primarily related to one site where the timing of the closure was accelerated.
In 2011, the net reduction of $2.8 million primarily related to four sites. Installation of a solar array system led to lower estimated future utility costs at one site; favorable environmental studies and regulatory approvals were achieved at a second and third site; and utilization of internal labor rather than external contractors at the fourth site enabled us to reduce our estimate of remediation costs. The estimated savings from the four sites were partially offset by an increase in remedial liabilities recorded at a fifth site due to a change in estimated costs following finalization of the corrective action plan.
In 2010, the net reduction of $8.3 million primarily related to three sites. Favorable environmental studies at one site led to favorable regulatory approvals and a reduction in the remediation period; and implementation of solar sippers at a second site and installation of additional equipment at a third site resulted in reductions to the estimated future utility costs due to increased efficiencies.

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Critical Accounting Policies and Estimates
The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. The following are the areas that we believe require the greatest amount of judgments or estimates in the preparation of the financial statements: revenue allowance, allowance for doubtful accounts, accounting for landfills, non-landfill closure and post-closure liabilities, remedial liabilities, goodwill, permits and other intangible assets, insurance accruals, legal matters, and provision for income taxes. Our management reviews critical accounting estimates with the Audit Committee of our Board of Directors on an ongoing basis and as needed prior to the release of our annual financial statements. See also Note 2, "Significant Accounting Policies," in Item 8, "Financial Statements and Supplementary Data," of this report, which discusses the significant assumptions used in applying our accounting policies.
Revenue Allowance.    Due to the nature of our business and the complex invoices that result from the services we provide, customers may withhold payments and attempt to renegotiate amounts invoiced. In addition, for some of the services we provide, our invoices are based on quotes that can either generate credits or debits when the actual revenue amount is known. Based on our industry knowledge and historical trends, we record a revenue allowance accordingly. Increases in overall sales volumes and the expansion of our customer base in recent years have also increased the volume of additions and deductions to the allowance during the year, as well as increased the amount of the allowance at the end of the year.
Our revenue allowance is intended to cover the net amount of revenue adjustments that may need to be credited to customers' accounts in future periods. We determine the appropriate total revenue allowance by evaluating the following factors on a customer-by-customer basis as well as on a consolidated level: historical collection trends, age of outstanding receivables, existing economic conditions and other information as deemed applicable. Revenue allowance estimates can differ materially from the actual adjustments, but historically our revenue allowance has been sufficient to cover the net amount of the reserve adjustments issued in subsequent reporting periods.
Allowance for Doubtful Accounts.    We establish an allowance for doubtful accounts to cover accounts receivable that may not be collectible. In establishing the allowance for doubtful accounts, we analyze the collectability of accounts that are large or past due. A considerable amount of judgment is required to make this assessment, based on detailed analysis of the aging of our receivables, the creditworthiness of our customers, our historical bad debts and other adjustments and current economic trends. Accounts receivable written off in subsequent periods can differ materially from the allowance for doubtful accounts provided, but historically our provision has been adequate.
Landfill Accounting.    We amortize landfill improvements and certain landfill-related permits over their estimated useful lives. The units-of-consumption method is used to amortize land, landfill cell construction, asset retirement costs and remaining landfill cells and sites. We also utilize the units-of-consumption method to record closure and post-closure obligations for landfill cells and sites. Under the units-of-consumption method, we include future estimated construction and asset retirement costs, as well as costs incurred to date, in the amortization base of the landfill assets. Additionally, where appropriate, as discussed below, we include probable expansion airspace that has yet to be permitted in the calculation of the total remaining useful life of the landfill. If it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time we make the decision to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
Landfill Assets—Landfill assets include the costs of landfill site acquisition, permits and cell construction incurred to date. These amounts are amortized under the units-of-consumption method such that the asset is completely amortized when the landfill ceases accepting waste.
Landfill Capacity—Landfill capacity, which is the basis for the amortization of landfill assets and for the accrual of final closure and post-closure obligations, represents total permitted airspace plus unpermitted airspace that management believes is probable of ultimately being permitted based on established criteria. Our management applies the following criteria for evaluating the probability of obtaining a permit for future expansion airspace at existing sites, which provides management a basis to evaluate the likelihood of success of unpermitted expansions:
Personnel are actively working to obtain the permit or permit modifications (land use, state and federal) necessary for expansion of an existing landfill, and progress is being made on the project.
Management expects to submit the application within the next year and to receive all necessary approvals to accept waste within the next five years.

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At the time the expansion is included in management's estimate of the landfill's useful economic life, it is probable that the required approvals will be received within the normal application and processing time periods for approvals in the jurisdiction in which the landfill is located.
The Company or other owner of the landfill has a legal right to use or obtain the right to use the land associated with the expansion plan.
There are no significant known political, technical, legal or business restrictions or other issues that could impair the success of such expansion.
A financial feasibility analysis has been completed and the results demonstrate that the expansion will have a positive financial and operational impact such that management is committed to pursuing the expansion.
Additional airspace and related additional costs, including permitting, final closure and post-closure costs, have been estimated based on the conceptual design of the proposed expansion.
Exceptions to the criteria set forth above are approved through a landfill-specific approval process that includes approval from our Chief Financial Officer and review by the Audit Committee of our Board of Directors. As of December 31, 2012, there was one unpermitted expansion at one location included in management's landfill calculation, which represented 20.96% of our remaining airspace at that date. As of December 31, 2012 and 2011, none of the unpermitted expansions were considered exceptions to management's established criteria described above. If actual expansion airspace is significantly different from management's estimate of expansion airspace, the amortization rates used for the units-of-consumption method would change, therefore impacting our profitability. If we determine that there is less actual expansion airspace at a landfill, this would increase amortization expense recorded and decrease profitability, while if we determine a landfill has more actual expansion airspace, amortization expense would decrease and profitability would increase.
Landfill Final Closure and Post-Closure Liabilities—The balance of landfill final closure and post-closure liabilities at December 31, 2012 and 2011 was $26.7 million and $25.8 million, respectively. We have material financial commitments for the costs associated with requirements of the EPA and the comparable regulatory agency in Canada for landfill final closure and post-closure activities. In the United States, the landfill final closure and post-closure requirements are established under the standards of the EPA, and are implemented and applied on a state-by-state basis. We develop estimates for the cost of these activities based on our evaluation of site-specific facts and circumstances, such as the existence of structures and other landfill improvements that would need to be dismantled, the amount of groundwater monitoring and leachate management expected to be performed, and the length of the post-closure period as determined by the applicable regulatory agency. Included in our cost estimates are our interpretation of current regulatory requirements and proposed regulatory changes. Such estimates may change in the future due to various circumstances including, but not limited to, permit modifications, changes in legislation or regulations, technological changes and results of environmental studies. We perform zero-based reviews of these estimated liabilities at least every five years or sooner if the occurrence of a significant event is likely to change the timing or amount of the currently estimated expenditures. We consider a significant event to be a new regulation or an amendment to an existing regulation, a new permit or modification to an existing permit, or a change in the market price of a significant cost item. Our cost estimates are calculated using internal sources as well as input from third party experts. These costs are measured at estimated fair value using present value techniques, and therefore changes in the estimated timing of closure and post-closure activities would affect the liability, the value of the related asset, and our results of operations.
Final closure costs are the costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state or provincial regulatory agency. These costs generally include the costs required to cap the final cell of the landfill (if not included in cell closure), to dismantle certain structures for landfills and other landfill improvements and regulation-mandated groundwater monitoring, and for leachate management. Post-closure costs involve the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. These costs generally include groundwater monitoring and leachate management. Regulatory post-closure periods are generally 30 years after landfill closure. Final closure and post-closure obligations are accrued on a units-of-consumption basis, such that the present value of the final closure and post-closure obligations are fully accrued at the date the landfill discontinues accepting waste.
Non-Landfill Closure and Post-Closure Liabilities.    The balance of our non-landfill closure and post-closure liabilities at December 31, 2012 and 2011 was $27.6 million and $9.1 million, respectively. We base estimates for non-landfill closure and post-closure liabilities on our interpretations of existing permit and regulatory requirements for closure and post-closure maintenance and monitoring. Our cost estimates are calculated using internal sources as well as input from third party experts. We use probability scenarios to estimate when future operations will cease and inflate the current cost of closing the non-landfill facility on a probability weighted basis using the appropriate inflation rate and then discounting the future value to arrive at an estimated present value of closure and post-closure costs. The estimates for non-landfill closure and post-closure liabilities are inherently uncertain due to the possibility that permit and regulatory requirements will change in the future, impacting the estimation of total costs and the timing of the expenditures. We review non-landfill closure and post-closure

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liabilities for changes to key assumptions that would impact the amount of the recorded liabilities. Changes that would prompt us to revise a liability estimate include changes in legal requirements that impact our expected closure plan or scope of work, in the market price of a significant cost item, in the probability scenarios as to when future operations at a location might cease, or in the expected timing of the cost expenditures. Changes in estimates for non-landfill closure and post-closure events immediately impact the required liability and the value of the corresponding asset. If a change is made to a fully-consumed asset, the adjustment is charged immediately to expense. When a change in estimate relates to an asset that has not been fully consumed, the adjustment to the asset is recognized in income prospectively as a component of amortization. Historically, material changes to non-landfill closure and post-closure estimates have been infrequent.
Remedial Liabilities.    The balance of our remedial liabilities at December 31, 2012 and 2011 was $167.2 million and $135.3 million, respectively. See Note 10, "Remedial Liabilities," to our consolidated financial statements for the three years ended December 31, 2012, for the changes to the remedial liabilities during the years ended December 31, 2012 and 2011. Remedial liabilities are obligations to investigate, alleviate and/or eliminate the effects of a release (or threat of a release) of hazardous substances into the environment and may also include corrective action under RCRA. Our remediation obligations can be further characterized as Long-term Maintenance, One-Time Projects, Legal and Superfund. Legal liabilities are typically comprised of litigation matters that involve potential liability for certain aspects of environmental cleanup and can include third party claims for property damage or bodily injury allegedly arising from or caused by exposure to hazardous substances originating from our activities or operations, or in certain cases, from the actions or inactions of other persons or companies. Superfund liabilities are typically claims alleging that we are a potentially responsible party ("PRP") and/or are potentially liable for environmental response, removal, remediation and cleanup costs at/or from either a facility we own or a site owned by a third party. As described in Note 17, "Commitments and Contingencies," to our consolidated financial statements for the three years ended December 31, 2012, Superfund liabilities also include certain liabilities payable to governmental entities for which we are potentially liable to reimburse the sellers in connection with our 2002 acquisition of substantially all of the assets of the Chemical Services Division (the "CSD assets") of Safety-Kleen Corp. Long-term Maintenance liabilities include the costs of groundwater monitoring, treatment system operations, permit fees and facility maintenance for inactive operations. One-Time Projects liabilities include the costs necessary to comply with regulatory requirements for the removal or treatment of contaminated materials.
Amounts recorded related to the costs required to remediate a location are determined by internal engineers and operational personnel and incorporate input from external third parties. The estimates consider such factors as the nature and extent of environmental contamination (if any); the terms of applicable permits and agreements with regulatory authorities as to cleanup procedures and whether modifications to such permits and agreements will likely need to be negotiated; the cost of performing anticipated cleanup activities based upon current technology; and in the case of Superfund and other sites where other parties will also be responsible for a portion of the clean up costs, the likely allocation of such costs and the ability of such other parties to pay their share. Each quarter, our management discusses if any events have occurred or milestones have been met that would warrant the creation of a new remedial liability or the revision of an existing remedial liability. Such events or milestones include identification and verification as a PRP, receipt of a unilateral administrative order under Superfund or requirement for RCRA interim corrective measures, completion of the feasibility study under Superfund or the corrective measures study under RCRA, new or modifications to existing permits, changes in property use, or a change in the market price of a significant cost item. Remedial liabilities are inherently difficult to estimate and there is a risk that the actual quantities of contaminants could differ from the results of the site investigation, which could materially impact the amount of our liability. It is also possible that chosen methods of remedial solutions will not be successful and funds will be required for alternative solutions.
Remedial liabilities are discounted only when the timing of the payments is estimable and the amounts are determinable. With the exception of remedial liabilities assumed as part of an acquisition that are measured at fair value, our experience has been that the timing of payments for remedial liabilities is usually not estimable and therefore the amounts of remedial liabilities are generally not discounted.
We establish reserves for estimated environmental liabilities based on acceptable technologies when we determine the liability is appropriate. Introductions of new technologies are subject to successful demonstration of the effectiveness of the alternative technology and regulatory approval. We routinely review and evaluate the sites for which we have established estimated environmental liabilities reserves to determine if there should be changes in the established reserves. The changes in estimates are reflected as adjustments in the ordinary course of business in the period when we determine that an adjustment is appropriate as new information becomes available. Upon demonstration of the effectiveness of the alternative technology and applicable regulatory approval, we update our estimated cost of remediating the affected sites.

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Goodwill.    Goodwill is assessed for impairment at least annually and as triggering events occur. Such triggering events include, but are not limited to:
A significant adverse change in legal factors or in the business climate,
An adverse action or assessment by a regulator,
Cash or operating losses at the reporting unit, or
Market capitalization that is below book value.
Our management tests for impairment by comparing the fair value of each reporting unit to the carrying value of the net assets assigned to each reporting unit, including goodwill. In the event the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill test is performed to measure the amount of impairment loss. When the fair value of the respective reporting units significantly exceeds the carrying value, we utilize the income method only as we believe the income approach more appropriately captures the specific growth and risk profile of the reporting units; whereas the market approach requires a qualitative assessment of a reporting unit's risk profile and growth prospects to selected, reasonably similar guideline publicly-traded companies which we believe is less specific to our business. We corroborate our approach by considering other factors such as the fair value of comparable companies to our reporting units, and also perform a reconciliation of the fair value of all our reporting units to our overall market capitalization.
We determine our reporting units by identifying the components of each operating segment, and then aggregate components having similar economic characteristics based on quantitative and / or qualitative factors. At December 31, 2012, we had five reporting units consisting of Technical Services, Field Services, Industrial Services, Lodging and Oil and Gas Field Services. We utilized the income approach (a discounted cash flow analysis) to determine the fair value of the Technical Services, Field Services, Industrial Services and Lodging reporting units as the fair value for these reporting units in 2012 significantly exceeded their respective carrying values. We corroborated our approach by considering other factors such as the fair value of comparable companies to our reporting units, and also performed a reconciliation of the fair value of all our reporting units to our overall market capitalization.
The fair value of the Oil and Gas Field Services reporting unit in 2012 was determined using a weighted average of the income approach and the market approach (a comparison to guideline companies), weighted primarily on the income approach. We utilized a weighted-average of the income approach and the market approach as the fair value under the income approach did not significantly exceed the carrying value due to lower than anticipated financial results of the reporting unit in the third quarter of 2012. The lower than anticipated results were primarily due to the repositioning of certain assets and rental equipment in the second and third quarters of 2012 to meet changing market conditions and unfavorable rain and weather conditions in Western Canada. These changes in the business negatively affected our revenues and profitability. The fair value of the reporting unit exceeded its carrying value by more than 10% at December 31, 2012. The financial performance of this reporting unit, which has a goodwill balance of approximately $39.8 million at December 31, 2012, is affected by fluctuations in oil and gas prices, and we have been closely monitoring its performance. As previously disclosed in our report on Form 10-Q for the third quarter of 2012, we assessed the performance of our Oil and Gas Field Services reporting unit in the third quarter of 2012 due to its lower than anticipated financial results. We performed an interim sensitivity analysis of the impact of the lower than anticipated results on the reporting unit's fair value in the third quarter, and concluded the fair value of the reporting unit more likely than not exceeds its carrying value at September 30, 2012. During 2013, we will continue to assess this reporting unit's performance.
As of December 31, 2011, the fair value of all our reporting units was determined using an income approach as the fair value for all reporting units significantly exceeded the respective carrying value. We corroborated our approach by considering other factors such as the fair value of comparable companies to our reporting units, and also performed a reconciliation of the fair value of all our reporting units to our overall market capitalization.
As of December 31, 2010, for the Industrial Services and Exploration Services reporting units, the estimated fair value was determined using a weighted average of the income approach and the market approach weighted primarily on the income approach. For the Technical Services, Field Services and Lodging reporting units, as of December 31, 2010, we utilized only the income approach to determine the fair value because the fair value for those reporting units has historically significantly exceeded the carrying value and there were no changes or events in the current year to indicate otherwise. We corroborated our approach by considering other factors such as the fair value of comparable companies to our reporting units, and also performed a reconciliation of the fair value of all our reporting units to our overall market capitalization.
Significant judgments are inherent in these analyses and include assumptions about the amount and timing of expected future cash flows, growth rates, and the determination of appropriate discount rates. We believe that the assumptions used in our impairment analyses are reasonable, but variations in any of the assumptions may result in different calculations of fair

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values that could result in a material impairment charge. The impairment analysis performed during the year ended December 31, 2012 utilized 2013 annual budgeted amounts. The discount rate assumptions were based on an assessment of our weighted average cost of capital (“WACC”). We did not record an impairment charge as a result of our goodwill impairment tests in 2012, 2011 and 2010 for our reporting units. We will continue to monitor the performance of our reporting units and if the business experiences adverse changes in these key assumptions, we will perform an interim goodwill impairment analysis.
Permits and Other Intangible Assets.    Our long-lived assets, including permits, are carried on our financial statements based on their cost less accumulated depreciation or amortization. We review the carrying value of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In order to assess whether a potential impairment exists, the assets' carrying values are compared with their undiscounted expected future cash flows. Estimating future cash flows requires significant judgment about factors such as general economic conditions and projected growth rates, and our estimates often vary from the cash flows eventually realized. Impairments are measured by comparing the fair value of the asset to its carrying value. Fair value is generally determined by considering (i) internally developed discounted projected cash flow analysis of the asset; (ii) actual third-party valuations; and/or (iii) information available regarding the current market environment for similar assets. If the fair value of an asset is determined to be less than the carrying amount of the asset, an impairment in the amount of the difference is recorded in the period that the events or changes in circumstances that indicated the carrying value of the assets may not be recoverable occurred. In the fourth quarter of 2011, we temporarily idled for approximately 18 months our hazardous waste incinerator in Ville Mercier, Quebec, which had a carrying value, including the permits, of $8.6 million as of December 31, 2012. We temporarily idled this facility due to additional disposal capacity acquired in 2011 and the declining local market conditions in Quebec. We performed an analysis of the carrying value of those long-lived assets in 2011 and 2012 and concluded that there was no impairment as the projected undiscounted cash flows substantially exceeded the carrying value of the assets.
There were no impairment charges during the years ended December 31, 2011 and 2010.
Insurance Accruals.    It is our policy to retain a significant portion of certain expected losses related primarily to workers' compensation, health insurance, comprehensive general and vehicle liability. The insurance accruals are based on claims filed and estimates of claims not reported and are developed by management with assistance from our third-party actuary and third-party claims administrator. The insurance accruals are driven by historical claims data and industry information. Significant changes in the frequency or amount of claims as compared to our historical information could materially affect our self-insurance liabilities. Actual expenditures required in future periods can differ materially from accruals established based on estimates.
Legal Matters.    As described in Note 17, "Commitments and Contingencies," to the financial statements included in Item 8, "Financial Statements and Supplementary Data," we are subject to legal proceedings which relate to our past acquisitions or which have arisen in the ordinary course of business. Accruals are established for legal matters when, in our opinion, it is probable that a liability exists and the liability can be reasonably estimated. As of December 31, 2012, we had reserves of $38.6 million (substantially all of which we had established as part of the purchase price for the CSD assets) consisting of (i) $34.5 million related to pending legal or administrative proceedings, including Superfund liabilities, which were included in the $221.5 million accrued environmental liabilities as of December 31, 2012 for closure, post-closure and remediation, as described above, and (ii) $4.1 million primarily related to federal and state enforcement actions, which were included in accrued expenses on the consolidated balance sheets. We also estimate that it is "reasonably possible," as that term is defined ("more than remote but less than likely"), that the amount of such total liabilities could be as much as $3.5 million more. Actual expenses incurred in future periods could differ materially from accruals established.
Provision for Income Taxes.    Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management's best estimate of future taxes to be paid. We are subject to income taxes in both the United States and in foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence. We have established a valuation allowance when, based on an evaluation of objective verifiable evidence, we believe it is more likely than not that some portion or all of deferred tax assets will not be realized.
A liability for uncertain tax positions is recorded to the extent a tax position taken or expected to be taken in a tax return does not meet certain recognition or measurement criteria. We record interest and penalties on these uncertain tax positions as applicable as a component of income tax expense.

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Table Of Contents

Results of Operations
The following table sets forth for the periods indicated certain operating data associated with our results of operations. This table and subsequent discussions should be read in conjunction with Item 6, "Selected Financial Data," and Item 8, "Financial Statements and Supplementary Data," of this report.
 
Percentage of Total Revenues
Year Ended December 31,
 
2012
 
2011
 
2010
 
2009
 
2008
Revenues
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
Cost of revenues (exclusive of items shown separately below)
70.4

 
69.5

 
69.9

 
70.2

 
68.7

Selling, general and administrative expenses
12.5

 
12.8

 
11.9

 
15.2

 
15.5

Accretion of environmental liabilities
0.5

 
0.5

 
0.6

 
1.0

 
1.0

Depreciation and amortization
7.4

 
6.2

 
5.4

 
6.0

 
4.3

Income from operations
9.2

 
11.0

 
12.2

 
7.6

 
10.5

Other (expense) income

 
0.3

 
0.2

 

 

Loss on early extinguishment of debt
(1.2
)
 

 
(0.1
)
 
(0.4
)
 
(0.5
)
Interest expense, net
(2.2
)
 
(2.0
)
 
(1.6
)
 
(1.5
)
 
(0.8
)
Income from continuing operations before provision for income taxes
5.8

 
9.3

 
10.7

 
5.7

 
9.2

(Benefit) provision for income taxes
(0.1
)
 
2.9

 
3.3

 
2.4

 
3.6

Income from continuing operations
5.9

 
6.4

 
7.4

 
3.3

 
5.6

Income from discontinued operations, net of tax

 

 
0.1

 
0.1

 

Net income
5.9
 %
 
6.4
 %
 
7.5
 %
 
3.4
 %
 
5.6
 %
Segment data
Performance of our segments is evaluated on several factors of which the primary financial measure is Adjusted EBITDA. The following tables set forth certain operating data associated with our results of operations and compare Adjusted EBITDA contribution by operating segment for the years ended December 31, 2012 and 2011 and the years ended December 31, 2011 and 2010. See footnote 4 under Item 6, “Selected Financial Data,” for a description of the calculation of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities. We consider the Adjusted EBITDA contribution from each operating segment to include revenue attributable to that segment less operating expenses, which include cost of revenues and selling, general and administrative expenses. Revenue attributable to each segment is generally external or direct revenue from third party customers. Direct revenue is the revenue allocated to the segment performing the provided service. Certain income or expenses of a non-recurring or unusual nature are not included in the operating segment's Adjusted EBITDA contribution.
During the quarter ended March 31, 2012, we re-assigned certain departments among our segments to support management reporting changes. Accordingly, we re-allocated shared departmental costs among our segments. We have recast the 2011 and 2010 segment information presented in the tables below to conform to the current year presentation. These tables and subsequent discussions should be read in conjunction with Item 8, “Financial Statements and Supplementary Data,” of this report and in particular Note 18, “Segment Reporting,” to such financial statements.

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Table Of Contents

Year ended December 31, 2012 versus Year ended December 31, 2011
 
Summary of Operations (in thousands)
 
December 31,
 
2012
 
2011
 
$
Change
 
%
Change
Direct Revenues:
 
 
 
 
 
 
 
Technical Services
$
937,754

 
$
885,374

 
$
52,380

 
5.9
 %
Field Services
239,968

 
260,312

 
(20,344
)
 
(7.8
)
Industrial Services
581,648

 
469,950

 
111,698

 
23.8

Oil and Gas Field Services
428,932

 
369,190

 
59,742

 
16.2

Corporate Items
(394
)
 
(690
)
 
296

 
(42.9
)
Total
2,187,908

 
1,984,136

 
203,772

 
10.3

Cost of Revenues (exclusive of certain items shown separately)(1):
 
 
 
 
 
 
 
Technical Services
615,346

 
572,496

 
42,850

 
7.5

Field Services
187,949

 
196,285

 
(8,336
)
 
(4.2
)
Industrial Services
407,667

 
335,538

 
72,129

 
21.5

Oil and Gas Field Services
319,991

 
266,591

 
53,400

 
20.0

Corporate Items
9,668

 
9,081

 
587

 
6.5

Total
1,540,621

 
1,379,991

 
160,630

 
11.6

Selling, General & Administrative Expenses:
 
 
 
 
 
 
 
Technical Services
77,419

 
77,204

 
215

 
0.3

Field Services
26,932

 
24,875

 
2,057

 
8.3

Industrial Services
34,058

 
30,877

 
3,181

 
10.3

Oil and Gas Field Services
33,132

 
26,216

 
6,916

 
26.4

Corporate Items
101,979

 
94,965

 
7,014

 
7.4

Total
273,520

 
254,137

 
19,383

 
7.6

Adjusted EBITDA(2):
 
 
 
 
 
 
 
Technical Services
244,989

 
235,674

 
9,315

 
4.0

Field Services
25,087

 
39,152

 
(14,065
)
 
(35.9
)
Industrial Services
139,923

 
103,535

 
36,388

 
35.1

Oil and Gas Field Services
75,809

 
76,383

 
(574
)
 
(0.8
)
Corporate Items
(112,041
)
 
(104,736
)
 
(7,305
)
 
7.0

Total
$
373,767

 
$
350,008

 
$
23,759

 
6.8
 %
_______________________________________
(1)
Items shown separately on the statements of income consist of (i) accretion of environmental liabilities and (ii) depreciation and amortization.
(2)
See footnote 4 under Item 6, "Selected Financial Data," for a discussion of Adjusted EBITDA.
Revenues
Technical Services revenues increased 5.9%, or $52.4 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to an increase in volumes being processed through our incinerators and landfills.
Field Services revenues decreased 7.8%, or $20.3 million, in the year ended December 31, 2012 from the comparable period in 2011. Field Services performed $43.6 million of emergency response work related to the Yellowstone River oil spill in Montana during the year ended December 31, 2011 and performed approximately $11.7 million of emergency response work associated with Hurricane Sandy during the year ended December 31, 2012.
Industrial Services revenues increased 23.8%, or $111.7 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to an increase in our lodging business ($78.6 million), growth in the oil sands region of Canada, and an increase in a broad array of our specialty services. These increases resulted partially from revenues associated with our acquisitions in 2012 and 2011, including Peak in June 2011.

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Oil and Gas Field Services revenues increased 16.2%, or $59.7 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to fluids handling and surface rentals activity related to our acquisition of Peak in June 2011 ($38.4 million) and increased exploration activities partially from revenues associated with an acquisition in July 2011 ($26.3 million), offset partially by a reduction in the energy services business ($12.3 million).
There are many factors which have impacted, and continue to impact, our revenues. These factors include, but are not limited to: the level of emergency response projects, the general conditions of the oil and gas industries, competitive industry pricing, and the effects of fuel prices on our fuel recovery fees.
Cost of Revenues
Technical Services cost of revenues increased 7.5%, or $42.9 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to increases in salary and labor expenses ($11.6 million), outside disposal and rail costs ($6.1 million), materials for reclaim costs ($4.1 million), chemicals and consumables expenses ($3.0), subcontractor fees ($2.8 million), outside transportation costs ($2.8 million), vehicle and equipment repair costs ($1.8 million), and changes in environmental estimates ($1.0 million), offset partially by a decrease in utilities costs ($1.7 million).
Field Services cost of revenues decreased 4.2%, or $8.3 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to decreased emergency response work. During the year ended December 31, 2011 Field Services performed emergency response work on the Yellowstone River oil spill in Montana. This reduction was partially offset by emergency response work performed during the year ended December 31, 2012 associated with Hurricane Sandy.
Industrial Services cost of revenues increased 21.5%, or $72.1 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to increased salary and labor expenses ($41.2 million), material and supplies expenses ($16.5 million), catering costs associated with the increased lodging services revenues ($6.9 million) and equipment rental fees ($4.1 million). These increases resulted partially from costs associated with our acquisitions in 2012 and 2011, including Peak in June 2011.
Oil and Gas Field Services cost of revenues increased 20.0%, or $53.4 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to salary and labor expenses ($26.6 million), subcontractor fees ($7.4 million), travel costs ($4.3 million), vehicle expenses ($4.2 million), rent expense ($3.9 million), equipment repair expenses ($2.9 million) and equipment rental fees ($2.3 million), offset partially by decreases in foreign exchange costs ($2.3 million). These net increases resulted partially from costs associated with our acquisitions in 2011.
We believe that our ability to manage operating costs is important to our ability to remain price competitive. We continue to upgrade the quality and efficiency of our waste treatment services through the development of new technology and continued modifications and upgrades at our facilities, and implementation of strategic sourcing initiatives. We plan to continue to focus on achieving cost savings relating to purchased goods and services through a strategic sourcing initiative. No assurance can be given that our efforts to reduce future operating expenses will be successful.
Selling, General and Administrative Expenses
Technical Services selling, general and administrative expenses increased 0.3%, or $0.2 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to increased salaries expense.
Field Services selling, general and administrative expenses increased 8.3%, or $2.1 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to increased salaries expense.
Industrial Services selling, general and administrative expenses increased 10.3%, or $3.2 million, in the year ended December 31, 2012 from the comparable period in 2011 primarily due to our 2012 acquisitions resulting in increased salaries expense.
Oil and Gas Field Services selling, general and administrative expenses increased 26.4%, or $6.9 million, in the year ended December 31, 2012 from the comparable period in 2011. The increase was primarily due to our 2011 acquisitions resulting in increases in salaries and travel expense.
Corporate Items selling, general and administrative expenses increased 7.4%, or $7.0 million, for the year ended December 31, 2012, as compared to the same period in 2011 primarily due to increases in professional fees primarily related to acquisition fees ($6.7 million), salaries ($2.4 million), travel costs related primarily to a national sales meeting held in April ($1.8 million), and employee benefits ($1.3 million), offset partially by decreased incentive compensation ($4.0 million).

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Table Of Contents

Depreciation and Amortization
 
Year Ended December 31,
 
(in thousands)
 
2012
 
2011
Depreciation of fixed assets
$
127,175

 
$
99,860

Landfill and other amortization
34,471

 
22,803

Total depreciation and amortization
$
161,646

 
$
122,663

Depreciation and amortization increased 31.8%, or $39.0 million, for the year ended December 31, 2012 compared to the comparable period in 2011. Depreciation of fixed assets increased primarily due to acquisitions and other increased capital expenditures in recent periods. Landfill and other amortization increased primarily due to the increase in volumes at our landfill facilities and additional amortization resulting from an increase in other intangibles recorded for recent acquisitions.
Other Income
Other income decreased $7.2 million during the year ended December 31, 2012 compared to the comparable period in 2011. Other income in the year ended December 31, 2011 included compensation of $3.4 million received from the Santa Clara Valley Transit Authority for the release by eminent domain of certain rail rights in connection with our hazardous waste facility located in San Jose, California, as well as a $1.9 million gain on remeasurement of the value of marketable securities as a result of the Peak acquisition. We remeasured the value of our previously held common shares in Peak at their fair value and recognized the resulting gain in other income.
Loss on Early Extinguishment of Debt
During the third quarter of 2012, we recorded a $26.4 million loss on early extinguishment of debt in connection with a redemption and repurchase of our $520.0 million previously outstanding senior secured notes. This loss consisted of $21.1 million of purchase, consent and redemption fees and non-cash expenses of $5.3 million, of which $8.8 million related to unamortized financing costs offset partially by $3.5 million of unamortized net premium.
Interest Expense, Net
 
Year Ended December 31,
 
(in thousands)
 
2012
 
2011
Interest expense
$
48,133

 
$
40,187

Interest income
(846
)
 
(798
)
Interest expense, net
$
47,287

 
$
39,389

Interest expense, net increased 20.1%, or $7.9 million, for the year ended December 31, 2012 compared to the comparable period in 2011. The increase in interest expense was primarily due to the issuance of $800.0 million of 5.25% senior unsecured notes in July 2012 and $600.0 million of 5.125% senior unsecured notes in December 2012, which was partially offset by our redemption and repurchase during the third quarter of 2012 of $520.0 million of previously outstanding 7.625% senior secured notes. The transactions resulted in an additional principal amount of notes outstanding during 2012 than for the comparable prior period, but at a more favorable interest rate.

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Table Of Contents

Year ended December 31, 2011 versus Year ended December 31, 2010
 
Summary of Operations (in thousands)
 
December 31,
 
2011
 
2010
 
$
Change
 
%
Change
Direct Revenues:
 
 
 
 
 
 
 
Technical Services
$
885,374

 
$
763,345

 
$
122,029

 
16.0
 %
Field Services
260,312

 
414,786

 
(154,474
)
 
(37.2
)
Industrial Services
469,950

 
362,259

 
107,691

 
29.7

Oil and Gas Field Services
369,190

 
192,694

 
176,496

 
91.6

Corporate Items
(690
)
 
(1,840
)
 
1,150

 
(62.5
)
Total
1,984,136

 
1,731,244

 
252,892

 
14.6

Cost of Revenues (exclusive of certain items shown separately)(1):
 
 
 
 
 
 
 
Technical Services
572,496

 
504,678

 
67,818

 
13.4

Field Services
196,285

 
284,368

 
(88,083
)
 
(31.0
)
Industrial Services
335,538

 
262,017

 
73,521

 
28.1

Oil and Gas Field Services
266,591

 
153,782

 
112,809

 
73.4

Corporate Items
9,081

 
5,895

 
3,186

 
54.0

Total
1,379,991

 
1,210,740

 
169,251

 
14.0

Selling, General & Administrative Expenses:
 
 
 
 
 
 
 
Technical Services
77,204

 
68,108

 
9,096

 
13.4

Field Services
24,875

 
26,853

 
(1,978
)
 
(7.4
)
Industrial Services
30,877

 
23,669

 
7,208

 
30.5

Oil and Gas Field Services
26,216

 
8,055

 
18,161

 
225.5

Corporate Items
94,965

 
79,127

 
15,838

 
20.0

Total
254,137

 
205,812

 
48,325

 
23.5

Adjusted EBITDA(2):
 
 
 
 
 
 
 
Technical Services
235,674

 
190,559

 
45,115

 
23.7

Field Services
39,152

 
103,565

 
(64,413
)
 
(62.2
)
Industrial Services
103,535

 
76,573

 
26,962

 
35.2

Oil and Gas Field Services
76,383

 
30,857

 
45,526

 
147.5

Corporate Items
(104,736
)
 
(86,862
)
 
(17,874
)
 
20.6

Total
$
350,008

 
$
314,692

 
$
35,316

 
11.2
 %
________________________________________
(1)
Items shown separately on the statements of income consist of (i) accretion of environmental liabilities and (ii) depreciation and amortization.
(2)
See footnote 4 under Item 6, "Selected Financial Data," for a discussion of Adjusted EBITDA.
 Revenues
Technical Services revenues increased 16.0%, or $122.0 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to changes in product mix and increases in pricing ($45.5 million), increases in volumes being processed through our treatment, storage and disposal facilities and waste water treatment plants ($16.8 million), the strengthening of the Canadian dollar ($4.9 million), an increase due to an acquisition in August 2011 and an increase in our base business. These increases were partially offset by reductions in volumes being processed through our solvent recycling facilities, incinerators and landfills ($3.2 million).
Field Services revenues decreased 37.2%, or $154.5 million, in the year ended December 31, 2011 from the comparable period in 2010. Field Services performed emergency response work related to the Yellowstone River oil spill in Montana during the year ended December 31, 2011 and in the Gulf of Mexico and Michigan during the year ended December 31, 2010 which accounted for $43.6 million and $253.0 million, respectively, of our third party revenues.  Excluding those oil spill project revenues, Field Services revenues increased for the year ended December 31, 2011 from the comparable period in 2010 primarily due to our large remedial project business ($6.9 million).  The remaining increase related primarily to growth in our base business.

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Table Of Contents

Industrial Services revenues increased 29.7%, or $107.7 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to an increase in our lodging business ($53.9 million), an increase in shutdown work performed at our refinery customers in Western Canada, the strengthening of the Canadian dollar ($10.8 million), and growth in the oil sands region of Canada. These increases resulted partially from revenues associated with recent acquisitions including Peak in June 2011.
Oil and Gas Field Services revenues increased 91.6%, or $176.5 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to fluids handling and surface rentals activity related to our acquisition of Peak in June 2011 ($78.9 million), increased exploration activities partially from revenues associated with an acquisition in July 2011 and from increased oil prices ($69.3 million), and an increase in the energy services business ($34.5 million), offset partially by intersegment expenses incurred.
There are many factors which have impacted, and continue to impact, our revenues. These factors include, but are not limited to: the level of emergency response projects, the effects of unseasonable weather conditions in the first quarter, the general conditions of the oil and gas industries particularly in the Alberta oil sands and other parts of Western Canada, competitive industry pricing, and the effects of fuel prices on our fuel recovery fees.
Cost of Revenues
Technical Services cost of revenues increased 13.4%, or $67.8 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to increases in salary and labor expenses ($15.6 million), fuel costs ($11.5 million), vehicle expenses and equipment repairs ($6.9 million), outside disposal and rail expenses ($6.3 million), materials for reclaim costs ($6.7 million), outside transportation costs ($5.0 million), chemicals and consumables costs ($3.8 million), materials and supplies costs ($4.2 million), turnaround and downtime costs ($3.6 million), equipment rentals and leased equipment costs ($2.6 million), subcontractor, temporary and owner operator fees ($2.1 million), and the strengthening of the Canadian dollar ($3.1 million), offset partially by a reduction in insurance costs ($2.0 million) and a year-over-year increase in favorable changes in environmental liability estimates ($0.7 million).
Field Services cost of revenues decreased 31.0%, or $88.1 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to decreased subcontractor fees, materials and supplies costs, equipment rental costs, fuel costs, travel and other costs associated with our large event business ($119.0 million). This decrease resulted largely from the level of work performed on the Yellowstone oil spill project during the year ended December 31, 2011 being significantly less than that of the oil spill project business in the Gulf of Mexico and Michigan that occurred during the comparable period of 2010.  Excluding those oil spill project costs, Field Services cost of revenues increased $29.6 million for the year ended December 31, 2011 from the comparable period in 2010 primarily due to increases in materials for reclaim or resale ($4.1 million), labor and related expenses ($4.6 million), outside disposal costs ($3.8 million), materials and supplies costs ($2.9 million), equipment rental fees ($3.3 million), fuel costs ($2.1 million), subcontractor fees ($2.6 million), outside transportation costs ($2.1 million), travel costs ($1.8 million) and vehicle expenses ($0.8 million), offset partially by a reduction in chemicals and consumables costs ($1.2 million).
Industrial Services cost of revenues increased 28.1%, or $73.5 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to salary and labor expenses ($41.4 million), material and supplies expenses ($9.8 million), catering costs associated with the increased lodging services revenues ($8.4 million), vehicle expenses ($7.7 million), equipment rental fees ($5.3 million), fuel costs ($5.2 million), subcontractor fees ($4.8 million), travel costs related to shutdown activity ($3.3 million), chemicals and consumables costs ($1.6 million), utilities costs ($1.4 million), insurance costs ($1.6 million), rent expense ($0.9 million), royalty fees ($1.2 million), and telephone costs ($0.8 million), and the strengthening of the Canadian dollar ($7.7 million), offset partially by decreases in lease operator expense due to buyout of leases ($23.7 million) and leased equipment costs ($2.0 million). These increases resulted partially from costs associated with recent acquisitions including Peak in June 2011.
Oil and Gas Field Services cost of revenues increased 73.4%, or $112.8 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to increases in salary and labor expenses ($50.3 million), fuel costs ($9.7 million), vehicle expenses ($9.2 million), subcontractor fees ($9.5 million), materials and supplies costs ($6.9 million), travel costs ($6.7 million), equipment repair expenses ($5.2 million), rent expense ($4.6 million), equipment rental fees ($4.0 million), temporary fees ($2.8 million), insurance costs ($1.2 million), and chemicals and consumables costs ($0.7 million), and the strengthening of the Canadian dollar ($6.3 million), offset partially by decreases in lease operator expense due to buyout of leases ($2.6 million) and leased equipment costs ($1.0 million).  These increases resulted partially from costs associated with recent acquisitions including Peak in June 2011.
Corporate Items cost of revenues increased $3.2 million for the year ended December 31, 2011, as compared to the comparable period in 2010 primarily due to increased health insurance related costs ($1.1 million), salary and labor expenses

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Table Of Contents

($1.0 million), fuel and vehicle expenses ($0.7 million) and travel costs ($0.4 million), offset partially by a reduction in insurance costs ($1.5 million).
We believe that our ability to manage operating costs is important in our ability to remain price competitive. We continue to upgrade the quality and efficiency of our waste treatment services through the development of new technology and continued modifications and upgrades at our facilities, and implementation of strategic sourcing initiatives. We plan to continue to focus on achieving cost savings relating to purchased goods and services through a strategic sourcing initiative. No assurance can be given that our efforts to reduce future operating expenses will be successful.
Selling, General and Administrative Expenses
Technical Services selling, general and administrative expenses increased 13.4%, or $9.1 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to an unfavorable change in environmental liability estimates in 2011 compared to a favorable change in environmental liability estimates in 2010 and from increased salaries, commissions and bonuses.
Field Services selling, general and administrative expenses decreased 7.4%, or $2.0 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to a decrease in commissions and bonus expense.
Industrial Services selling, general and administrative expenses increased 30.5%, or $7.2 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to the recent acquisitions resulting in increases in salaries, commissions and bonus expense, professional fees and travel costs.
Oil and Gas Field Services selling, general and administrative expenses increased 225.5%, or $18.2 million, in the year ended December 31, 2011 from the comparable period in 2010 primarily due to the recent acquisitions resulting in increases in salaries, commissions and bonus expense, professional fees, travel costs, and due to the recovery in 2010 of $2.2 million of pre-acquisition receivables for which an allowance was previously recorded.
Corporate Items selling, general and administrative expenses increased 20.0%, or $15.8 million, for the year ended December 31, 2011, as compared to the same period in 2010 primarily due to increases in salaries and bonuses ($5.2 million), professional fees primarily related to acquisition costs ($4.4 million), stock-based compensation ($1.3 million), health insurance related costs ($1.2 million), employer contribution costs related to U.S. and Canadian retirement savings plans ($1.2 million), rent expense ($1.1 million), year-over-year severance costs ($0.9 million), computer expenses ($0.5 million), and travel costs ($0.4 million), offset partially by a reduction in marketing and branding costs ($1.8 million).
Depreciation and Amortization
 
Year Ended December 31,
 
(in thousands)
 
2011
 
2010
Depreciation of fixed assets
$
99,860

 
$
72,917

Landfill and other amortization
22,803

 
19,556

Total depreciation and amortization
$
122,663

 
$
92,473

Depreciation and amortization increased 32.6%, or $30.2 million, for the year ended December 31, 2011 compared to the comparable period in 2010. Depreciation of fixed assets increased primarily due to acquisitions and other increased capital expenditures in recent periods. Landfill and other amortization increased primarily due to the increase in other intangibles resulting from recent acquisitions.
Other Income
Other income increased $3.6 million during the year ended December 31, 2011 compared to the comparable period in 2010, Other income in the year ended December 31, 2011 included compensation of $3.4 million received from the Santa Clara Valley Transit Authority for the release by eminent domain of certain rail rights in connection with our hazardous waste facility located in San Jose, California, as well as a $1.9 million gain on remeasurement of marketable securities as a result of the Peak acquisition. We remeasured our previously held common shares in Peak at their fair value and recognized the resulting gain in other income. Other income in the year ended December 31, 2010 included a gain on sale of certain other marketable securities of $2.4 million.

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Table Of Contents

Interest Expense, Net
 
 
Year Ended December 31,
 
 
(in thousands)
 
 
2011
 
2010
Interest expense
 
$
40,187

 
$
28,810

Interest income
 
(798
)
 
(874
)
Interest expense, net
 
$
39,389

 
$
27,936

Interest expense, net increased 41.0%, or $11.5 million, for the year ended December 31, 2011 compared to the comparable period in 2010. The increase in interest expense was primarily due to the issuance of $250.0 million in senior secured notes in March 2011 and the amendment of our revolving credit facility in May 2011.
Income Taxes
Our effective tax rate for fiscal years 2012, 2011 and 2010 was (2)%, 31% and 31%, respectively. Our effective tax rate is affected by recurring items, such as tax rates in Canada and the relative amount of income we earn in Canada, which has increased due to our Canadian acquisitions. In addition, the interest and penalties accrual for uncertain tax positions has a material impact on our effective rate. The rate is also affected by discrete items that may occur in any given year, but are not consistent from year to year. In addition to state income taxes, the following items had the most significant impact on the differences in our effective tax rate and in our U.S. federal income tax rate:
2012
A $52.4 million (41.0%) reduction resulting from the release of unrecognized tax benefits including accrued interest and penalties.
A $8.6 million (6.7%) reduction resulting from rate differences between Canada and the U.S.
A $1.7 million (1.3%) increase resulting from the annual calculation of accrued interest and penalties for uncertain tax positions.
A $2.2 million (1.7%) increase resulting from non-deductible transaction costs relating to the 2012 acquisitions.
2011
A $6.0 million (3.2%) reduction resulting from the release of unrecognized tax benefits including interest and penalties.
A $10.2 million (5.5%) reduction resulting from rate differences between Canada and the U.S.
A $2.2 million (1.2%) increase resulting from the annual calculation of accrued interest and penalties for uncertain tax positions.
A $2.2 million (1.2%) reduction resulting from a federal solar tax credit.
A $1.1 million (0.6%) reduction resulting from the partial release of a valuation allowance on our foreign tax credits.
2010
A $14.3 million (7.6%) reduction resulting from the release of unrecognized tax benefits including interest and penalties.
A $6.8 million (3.6%) reduction resulting from rate differences between Canada and the U.S.
A $2.6 million (1.4%) increase resulting from the annual calculation of accrued interest and penalties for uncertain tax positions.
A $2.1 million (1.1%) increase resulting from net Canadian withholding tax expense on interest payments.
Income tax benefit for the year ended December 31, 2012 was $1.9 million compared to an income tax expense of $57.4 million for the comparable period in 2011. The benefit in 2012 was primarily due to a decrease in unrecognized tax benefits of $52.4 million (net of interest and penalties of $29.3 million) resulting from expiring statute of limitation periods related to an historical Canadian debt restructuring transaction. The income tax expense for the year ended December 31, 2011 decreased $0.4 million to $57.4 million from $57.8 million for the comparable period in 2010.
A valuation allowance is required to be established when, based on an evaluation of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2012 and December 31, 2011, we had a remaining valuation allowance of $25.6 million and $11.5 million, respectively. The Safety-Kleen acquisition accounted for $12.5 million of the increase in the valuation allowance, which consisted of $7.8 million of foreign tax credits and $4.7 million of foreign net operating loss carryforwards. The total allowance as of December 31, 2012 consisted of $17.6 million of foreign tax credits, $1.4 million of state net operating loss carryforwards and $6.6 million of foreign net operating

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