CLH-3.31.2013-Q1
Table of Contents

UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013
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 Number 001-34223
_______________________
CLEAN HARBORS, INC.
(Exact name of registrant as specified in its charter)
Massachusetts
 
04-2997780
(State or Other Jurisdiction of Incorporation or Organization)
 
(IRS Employer Identification No.)
 
 
 
42 Longwater Drive, Norwell, MA
 
02061-9149
(Address of Principal Executive Offices)
 
(Zip Code)
(781) 792-5000
(Registrant’s Telephone Number, Including area code)
_______________________
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 12 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 x  No o

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  x  No o

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 x
 
Accelerated filer o
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o  No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value
 
60,533,160
(Class)
 
(Outstanding as of May 6, 2013)


Table of Contents

CLEAN HARBORS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 
Page No.
 
 
PART I: FINANCIAL INFORMATION
 
 
 
ITEM 1: Unaudited Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents



CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

(in thousands)

 
 
March 31,
2013
 
December 31,
2012
ASSETS
 
(unaudited)
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
222,104

 
$
229,836

Marketable securities
 
10,905

 
11,778

Accounts receivable, net of allowances aggregating $13,531 and $11,125, respectively
 
563,691

 
541,423

Unbilled accounts receivable
 
32,220

 
27,072

Deferred costs
 
16,987

 
6,888

Prepaid expenses and other current assets
 
57,828

 
75,778

Inventories and supplies
 
144,476

 
171,441

Deferred tax assets
 
25,371

 
22,577

Total current assets
 
1,073,582

 
1,086,793

Property, plant and equipment, net
 
1,549,806

 
1,531,763

Other assets:
 
 
 
 
Long-term investments
 
4,354

 
4,354

Deferred financing costs
 
23,239

 
21,657

Goodwill
 
572,406

 
593,771

Permits and other intangibles, net
 
566,910

 
572,817

Other
 
13,081

 
14,651

Total other assets
 
1,179,990

 
1,207,250

Total assets
 
$
3,803,378

 
$
3,825,806

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of capital lease obligations
 
$
4,320

 
$
5,092

Accounts payable
 
263,564

 
256,468

Deferred revenue
 
62,162

 
50,942

Accrued expenses
 
212,424

 
232,429

Current portion of closure, post-closure and remedial liabilities
 
21,575

 
24,121

Total current liabilities
 
564,045

 
569,052

Other liabilities:
 
 
 
 
Closure and post-closure liabilities, less current portion of $3,683 and $8,791, respectively
 
41,670

 
45,457

Remedial liabilities, less current portion of $17,892 and $15,330, respectively
 
156,676

 
151,890

Long-term obligations
 
1,400,000

 
1,400,000

Capital lease obligations, less current portion
 
2,154

 
2,879

Deferred taxes, unrecognized tax benefits and other long-term liabilities
 
215,365

 
224,456

Total other liabilities
 
1,815,865

 
1,824,682

Stockholders’ equity:
 
 
 
 
Common stock, $.01 par value:
 
 
 
 
Authorized 80,000,000; shares issued and outstanding 60,491,452 and 60,385,453
 shares, respectively
 
605

 
604

Shares held under employee participation plan
 
(469
)
 
(469
)
Additional paid-in capital
 
885,733

 
880,979

Accumulated other comprehensive income
 
25,771

 
49,632

Accumulated earnings
 
511,828

 
501,326

Total stockholders’ equity
 
1,423,468

 
1,432,072

Total liabilities and stockholders’ equity
 
$
3,803,378

 
$
3,825,806

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share amounts)

 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
Service revenues
 
$
672,622

 
$
534,311

 
Product revenues
 
189,541

 
37,711

 
Total revenues
 
862,163

 
572,022

 
 
 
 
 
 
 
Cost of revenues (exclusive of items shown separately below)
 
 
 
 
 
Service revenues
 
468,372

 
369,125

 
Product revenues
 
167,652

 
31,190

 
Total cost of revenues
 
636,024

 
400,315

 
 
 
 
 
 
 
Selling, general and administrative expenses
 
128,470

 
70,759

 
Accretion of environmental liabilities
 
2,835

 
2,416

 
Depreciation and amortization
 
60,006

 
36,831

 
Income from operations
 
34,828

 
61,701

 
Other income (expense)
 
525

 
(299
)
 
Interest expense, net of interest income of $111 and $186, respectively
 
(19,873
)
 
(11,272
)
 
Income before provision for income taxes
 
15,480

 
50,130

 
Provision for income taxes
 
4,978

 
18,115

 
Net income
 
$
10,502

 
$
32,015

 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
Basic
 
$
0.17

 
$
0.60

 
Diluted
 
$
0.17

 
$
0.60

 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
60,464

 
53,227

 
Weighted average common shares outstanding - diluted
 
60,630

 
53,488

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Net income
 
$
10,502

 
$
32,015

Other comprehensive (loss) income:
 
 
 
 
Unrealized (losses) gains on available-for-sale securities (net of taxes of $70 and $41, respectively)
 
(549
)
 
363

Foreign currency translation adjustments
 
(23,312
)
 
14,817

Other comprehensive (loss) income
 
(23,861
)
 
15,180

Comprehensive (loss) income
 
$
(13,359
)
 
$
47,195


The accompanying notes are an integral part of these unaudited consolidated financial statements.


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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
Net income
 
$
10,502

 
$
32,015

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
 
Depreciation and amortization
 
60,006

 
36,831

Pre-tax, non-cash acquisition accounting adjustments
 
13,559

 

Allowance for doubtful accounts
 
1,823

 
203

Amortization of deferred financing costs and debt discount
 
846

 
367

Accretion of environmental liabilities
 
2,835

 
2,416

Changes in environmental liability estimates
 
(58
)
 
(646
)
Deferred income taxes
 
32

 
(269
)
Stock-based compensation
 
1,887

 
2,141

Excess tax benefit of stock-based compensation
 
(1,227
)
 
(713
)
Income tax benefit related to stock option exercises
 
1,216

 
713

Other expense (income)
 
(525
)
 
299

Environmental expenditures
 
(5,291
)
 
(1,722
)
Changes in assets and liabilities, net of acquisitions
 
 
 
 
Accounts receivable
 
(28,726
)
 
(11,502
)
Inventories and supplies
 
13,573

 
(1,453
)
Other current assets
 
6,377

 
(1,890
)
Accounts payable
 
(16,112
)
 
(4,302
)
Other current and long-term liabilities
 
(21,128
)
 
(22,935
)
Net cash from operating activities
 
39,589

 
29,553

Cash flows from investing activities:
 
 
 
 
Additions to property, plant and equipment
 
(72,249
)
 
(27,661
)
Proceeds from sales of fixed assets
 
921

 
425

Acquisitions, net of cash acquired
 
(197
)
 
(8,751
)
Additions to intangible assets, including costs to obtain or renew permits
 
(725
)
 
(425
)
Purchase of marketable securities
 

 
(4,468
)
Other
 

 
5,120

Net cash used in investing activities
 
(72,250
)
 
(35,760
)
Cash flows from financing activities:
 
 
 
 
Change in uncashed checks
 
26,419

 
(13,576
)
Proceeds from exercise of stock options
 
397

 
30

Remittance of shares, net
 
(41
)
 

Proceeds from employee stock purchase plan
 
1,546

 
1,238

Deferred financing costs paid
 
(2,318
)
 

Payments on capital leases
 
(1,346
)
 
(2,166
)
Issuance costs related to 2012 issuance of common stock
 
(250
)
 

Distribution of cash earned on employee participation plan
 

 
(38
)
Excess tax benefit of stock-based compensation
 
1,227

 
713

Net cash from financing activities
 
25,634

 
(13,799
)
Effect of exchange rate change on cash
 
(705
)
 
810

Decrease in cash and cash equivalents
 
(7,732
)
 
(19,196
)
Cash and cash equivalents, beginning of period
 
229,836

 
260,723

Cash and cash equivalents, end of period
 
$
222,104

 
$
241,527

 
 
 
 
 
Supplemental information:
 
 
 
 
Cash payments for interest and income taxes:
 
 
 
 
Interest paid
 
$
21,725

 
$
20,811

Income taxes paid
 
3,662

 
1,050

Non-cash investing and financing activities:
 
 
 
 
Property, plant and equipment accrued
 
21,722

 
19,766

Transfer of inventory to property, plant and equipment
 
11,369

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 
Common Stock
 
Shares Held
Under
Employee
Participation
Plan
 
 
 
Accumulated
Other
Comprehensive
Income
 
 
 
 
 
Number
of
Shares
 
$ 0.01
Par
Value
 
 
Additional
Paid-in
Capital
 
 
Accumulated
Earnings
 
Total
Stockholders’
Equity
Balance at January 1, 2013
60,385

 
$
604

 
$
(469
)
 
$
880,979

 
$
49,632

 
$
501,326

 
$
1,432,072

Net income

 

 

 

 

 
10,502

 
10,502

Other comprehensive loss

 

 

 

 
(23,861
)
 

 
(23,861
)
Stock-based compensation
10

 

 

 
1,887

 

 

 
1,887

Issuance of restricted shares, net of shares remitted
(3
)
 

 

 
(41
)
 

 

 
(41
)
Issuance costs related to 2012 issuance of common stock

 

 

 
(250
)
 

 

 
(250
)
Exercise of stock options
61

 
1

 

 
396

 

 

 
397

Net tax benefit on exercise of stock-based awards

 

 

 
1,216

 

 

 
1,216

Employee stock purchase plan
38

 

 

 
1,546

 

 

 
1,546

Balance at March 31, 2013
60,491

 
$
605

 
$
(469
)
 
$
885,733

 
$
25,771

 
$
511,828

 
$
1,423,468


The accompanying notes are an integral part of these unaudited consolidated financial statements.


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CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

The accompanying consolidated interim financial statements include the accounts of Clean Harbors, Inc. and its subsidiaries (collectively, “Clean Harbors” or the “Company”) and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. The results for interim periods are not necessarily indicative of results for the entire year or any other interim periods. The financial
statements presented herein should be read in connection with the financial statements included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2012.
    
During the first quarter of 2013, the Company adjusted its operating segments to integrate the business activities of Safety-Kleen, Inc. and its subsidiaries (collectively, “Safety-Kleen”) acquired in December 2012, and to incorporate other changes made in 2013 to the manner in which the Company manages its business, makes operating decisions and assesses its performance. Under the new structure, the Company's operations are managed in five reportable segments: Technical Services, Oil Re-refining and Recycling, SK Environmental Services, Industrial and Field Services and Oil and Gas Field Services. The prior year segment information has been recast to conform to the current year presentation. See Note 17, “Segment Reporting.”
(2) SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are described in Note 2, "Significant Accounting Policies," in the Company's Annual Report on Form 10-K for the year ended December 31, 2012. On December 28, 2012, the Company acquired 100% of the outstanding common shares of Safety-Kleen. See Note 3, “Business Combinations.” No revenue, expense, income or loss of Safety-Kleen was included in the Company's consolidated statements of income for the year ended December 31, 2012 due to the immateriality of the operating results subsequent to December 28, 2012.
Safety-Kleen's operating results are included in the Company's unaudited consolidated statements of income beginning with the three months ended March 31, 2013, and reflect the application of certain significant accounting policies as described below:
Revenue Recognition and Deferred Revenue
S-K Environmental Services revenue is generated from providing parts cleaning services, containerized waste services, oil collection services and other complementary products and services.
Parts cleaning services generally consist of placing a specially designed parts washer at a customer's premises and then, on a recurring basis, delivering clean solvent or aqueous-based washing fluid, cleaning and servicing the parts washer and removing the used solvent or aqueous fluid. The Company also services customer-owned parts washers. Revenue from parts cleaning services is recognized over the service interval. Service intervals represent the actual amount of time between service visits to a particular parts cleaning customer. Average service intervals vary from seven to fourteen weeks depending on several factors, such as customer accommodation, types of machines serviced and frequency of use.
Containerized waste services consist of profiling, collecting, transporting and recycling or disposing of a wide variety of hazardous and non-hazardous wastes. Revenue is recognized upon disposal. The Company tracks the amount of time it takes from collection of the customer's waste to delivery to the disposal outlet, which represents a deferral period of approximately two and one-half weeks.
Oil collection services consist of collecting used oil which is transferred to the Oil Re-refining and Recycling segment. While in the past customers were charged to collect and remove their used oil, with increases in oil commodity prices, most customers now require payment for their used oil. However, the Company still charges to collect used oil in certain circumstances, such as when it is high in water content or of poor quality. Revenue is recognized when services are performed.
Other complementary products and services include vacuum services, allied products and other environmental services. Revenue is recognized when products are delivered and services are performed.
Oil Re-refining and Recycling revenue is generated from re-refining used oil to produce high quality base and blended lubricating oils, and recycling used oil collected in excess of the Company's re-refining capacity into recycled fuel oil. The high quality base and blended lubricating oils are sold to third-party distributors, retailers, government agencies, fleets, railroads and

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industrial customers. The recycled fuel oil is sold to asphalt plants, industrial plants, blenders, pulp and paper companies, vacuum gas oil producers and marine diesel oil producers. Revenue is recognized upon delivery.
Deferred Costs Relating to Deferred Revenue
Direct costs associated with the handling and transportation of waste prior to its disposal and other variable direct costs associated with the parts cleaning and related lines of service are capitalized and deferred. The deferred costs are included in current assets in the consolidated balance sheet and expensed when the related revenues are recognized.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU 2013-02 Comprehensive Income (Topic 220) - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The new guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component. Entities are required to present, either on the face of the income statement where net income is presented or in the notes, significant amounts reclassified out of AOCI by respective line items of net income if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required to be reclassified in their entirety to net income, entities are required to cross-reference the disclosures required under U.S. GAAP that provide additional detail about those amounts. This guidance is effective prospectively for annual and interim reporting periods beginning after December 31, 2012. The Company adopted the standard on January 1, 2013. The amounts required to be disclosed under this guidance are disclosed in Note 14, “Accumulated Other Comprehensive Income.”
Reclassifications
The Company's revenues and cost of revenues in the consolidated statements of income and the changes in assets and liabilities, net of acquisitions in the consolidated statements of cash flows for the three months ended March 31, 2012 have been reclassified to conform to the current year presentation.
(3) BUSINESS COMBINATIONS
Safety-Kleen, Inc.
On December 28, 2012, the Company acquired 100% of the outstanding common shares of Safety-Kleen 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 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. The Company incurred acquisition-related costs of approximately $1.2 million in connection with the transaction which are included in selling, general and administrative expenses in the consolidated statements of income for the three months ended March 31, 2013. The Company financed the purchase through a combination of approximately $300.0 million of existing cash, $369.3 million in net proceeds from the Company's public offering of 6.9 million shares of Clean Harbors common stock, and approximately $589.0 million in net proceeds from the Company's 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.
The fair value of all the acquired identifiable assets and liabilities summarized below is provisional pending finalization of the Company's acquisition accounting. Measurement period adjustments reflect new information obtained about facts and circumstances that existed as of the acquisition date. The Company believes that such preliminary allocations provide a reasonable basis for estimating the fair values of assets acquired and liabilities assumed but the Company is waiting for additional information necessary to finalize fair value. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Final determination of the fair value may result in further adjustments to the values presented below. The following table summarizes the recognized amounts of identifiable assets acquired and liabilities assumed (in thousands).

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At December 28, 2012
 
Measurement Period Adjustments
 
At Acquisition Date (As Adjusted)
Inventories and supplies
$
102,339

 
$
6,537

 
$
108,876

Other current assets (i)
152,245

 
2,240

 
154,485

Property, plant and equipment
514,712

 
779

 
515,491

Permits and other intangibles
421,400

 
4,577

 
425,977

Other assets
4,985

 
(1,147
)
 
3,838

Current liabilities
(192,652
)
 
(2,910
)
 
(195,562
)
Closure and post-closure liabilities, less current portion
(15,774
)
 
10,201

 
(5,573
)
Remedial liabilities, less current portion
(38,370
)
 
(10,650
)
 
(49,020
)
Deferred taxes, unrecognized tax benefits and other long-term liabilities
(128,375
)
 
8,520

 
(119,855
)
Total identifiable net assets
820,510

 
18,147

 
838,657

Goodwill (ii)
436,749

 
(18,147
)
 
418,602

Total
$
1,257,259

 
$

 
$
1,257,259

_______________________
(i)
The fair value of the assets acquired includes customer receivables with a preliminary aggregate fair value of $132.3 million. Combined gross amounts due were $142.2 million.
(ii)
Goodwill represents the excess of the fair value of the net assets acquired over the purchase price. Goodwill of $206.7 million, $142.3 million, $67.5 million, and $2.1 million has been recorded in the Oil Re-refining and Recycling, SK Environmental Services, Industrial and Field Services and Technical Services segments, respectively. None of the goodwill related to this acquisition will be deductible for tax purposes.
The Company has determined that the separate disclosure of Safety-Kleen's revenues and earnings is impracticable for the three months ended March 31, 2013 due to the integration of Safety-Kleen operations into the Company upon acquisition.
Unaudited Pro Forma Financial Information
The following unaudited pro forma combined summary financial information presented below gives effect to the following transactions as if they had occurred as of January 1, 2011, and assumes that there were no material, non-recurring pro forma adjustments directly attributable to: (i) the acquisition of Safety-Kleen, (ii) the sale of 6.9 million shares of the Company's common stock, (iii) the issuance of $600.0 million aggregate principal amount of 5.125% senior unsecured notes due 2021, and (iv) the payment of related fees and expenses (in thousands).
 
For the Three Months Ended
 
March 31, 2012
Pro forma combined revenues
$
883,384

Pro forma combined net income
$
31,191

This pro forma financial information is not necessarily indicative of the Company's consolidated operating results that would have been reported had the transactions been completed as described herein, nor is such information necessarily indicative of the Company's consolidated results for any future period.
Other 2012 Acquisitions
The Company 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 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 $107.7 million, including the assumption and payment of debt of $7.7 million and post-closing adjustments of $0.9 million based upon the assumed target amounts of working capital. Management has determined the preliminary

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purchase price allocations based on estimates of the fair values of all tangible and intangible assets acquired and liabilities assumed. Such amounts are subject to adjustment based on the additional information necessary to determine fair values. The Company believes that such information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize fair value.
As of March 31, 2013, the Company had finalized the acquisition accounting of the identified acquired assets and liabilities for the acquisitions completed in the third quarter of 2012 and the second quarter of 2012. The Company has not finalized the acquisition accounting for the acquisition completed in the fourth quarter of 2012. The Company expects to finalize the remaining valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition dates. Final determination of the fair value may result in further adjustments to the values presented below (in thousands).
 
At Acquisition Dates
 
Measurement Period Adjustments
 
At Acquisition Dates (As Adjusted)
Current assets (i)
$
20,270

 
$
324

 
$
20,594

Property, plant and equipment
51,901

 
(8
)
 
51,893

Customer relationships and other intangibles
21,770

 

 
21,770

Other assets
53

 
4

 
57

Current liabilities
(5,277
)
 
(179
)
 
(5,456
)
Other liabilities
(5,133
)
 
(73
)
 
(5,206
)
Total identifiable net assets
83,584

 
68

 
83,652

Goodwill (ii)
23,956

 
129

 
24,085

Total
$
107,540

 
$
197

 
$
107,737

______________________
(i)
The preliminary fair value of the financial assets acquired included customer receivables with an aggregate fair value of $13.0 million. Combined gross amounts due were $13.5 million.  
(ii)
Goodwill represents the excess of the fair value of the net assets acquired over the purchase price attributed to expected operating and cross selling synergies. The goodwill has been assigned to the Industrial and Field Services segment and will not be deductible for tax purposes.
The following unaudited pro forma combined financial data presents information as if the 2012 acquisitions had been acquired as of January 1, 2011 and assumes that there were no material, non-recurring pro forma adjustments directly attributable to those acquisitions. The pro forma financial information does not necessarily reflect the actual results that would have been reported had the Company and those three acquisitions been combined during the periods presented, nor is it necessarily indicative of the future results of operations of the combined companies (in thousands).
 
For the Three Months Ended
 
March 31, 2012
Pro forma combined revenues
$
607,482

Pro forma combined net income
$
36,098

Acquisition related costs of $0.2 million for the other 2012 acquisitions were included in selling, general and administrative expenses in the Company's consolidated statements of income for the three months ended March 31, 2013.
(4) FAIR VALUE MEASUREMENTS
The Company’s financial instruments consist of cash and cash equivalents, marketable securities, receivables, trade payables, auction rate securities, derivative financial instruments and long-term debt. The estimated fair value of cash equivalents, receivables, and trade payables approximate their carrying value due to the short maturity of these instruments and are deemed to be Level 2 in the fair value hierarchy. The fair value of the Company’s unsecured senior notes (due 2020 and 2021) at March 31, 2013 were $817.0 million and $604.0 million, respectively, and at December 31, 2012 were $816.0 million and $623.5 million, respectively, based on quoted market prices or available market data. The senior unsecured notes fair value is Level 2 in the fair value hierarchy.

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The Company's assets measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012 were as follows (in thousands):
March 31, 2013
 
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance at March 31, 2013
Assets:
 
 
 
 
 
 
 
 
Auction rate securities (i)
 
$

 
$

 
$
4,354

 
$
4,354

Derivative instruments (ii)
 
$

 
$
9

 
$

 
$
9

Marketable securities (iii)
 
$
10,905

 
$

 
$

 
$
10,905

Liabilities:
 
 
 
 
 
 
 
 
Derivative instruments (ii)
 
$

 
$
816

 
$

 
$
816

December 31, 2012
 
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance at
December 31,
2012
Assets:
 
 
 
 
 
 
 
 
Auction rate securities (i)
 
$

 
$

 
$
4,354

 
$
4,354

Derivative instruments (ii)
 
$

 
$
165

 
$

 
$
165

Marketable securities (iii)
 
$
11,778

 
$

 
$

 
$
11,778

Liabilities:
 
 
 
 
 
 
 
 
Derivative instruments (ii)
 
$

 
$
1,242

 
$

 
$
1,242

________________________________________________
(i)
The auction rate securities are classified as available-for-sale and the fair value of these securities was estimated utilizing a probability discounted cash flow analysis. As of March 31, 2013, all of the Company's auction rate securities continue to have AAA underlying ratings. The Company attributes the $0.3 million decline in the fair value of the securities from the original cost basis to external liquidity issues rather than credit issues. The Company assessed the decline in value to be temporary because it does not intend to sell and it is more likely than not that the Company will not have to sell the securities before their maturity. During the three months ended March 31, 2013 and 2012, the Company did not record any unrealized pre-tax gain or loss on its auction rate securities. 
(ii)
The fair value of derivatives is recorded based on the present value of cash flows using a crude oil forward rate curve.
(iii)
The fair value of marketable securities is recorded based on quoted market prices and changes in fair value were included in other comprehensive income.
The following table presents the changes in the Company’s auction rate securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2013 and 2012 (in thousands):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Balance at beginning of period
 
$
4,354

 
$
4,245

Unrealized gain (loss) included in other comprehensive income
 

 

Balance at March 31,
 
$
4,354

 
$
4,245


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Derivative Financial Instruments
The Company acquired several commodity derivatives with the Safety-Kleen acquisition on December 28, 2012. The Company uses commodity derivatives to manage against significant fluctuations in oil and oil derivative commodity prices and indices, specifically the ICIS-LOR rate and 6-oil index. All commodity derivatives are comprised of cashless collar contracts related to crude oil prices, pursuant to which the Company sells a call to a bank and then purchases a put from the same bank. The derivative instruments are not designated as hedges and expire in 2013 and 2014. The following table presents the fair value for those assets and liabilities measured at fair value as of March 31, 2013 (fair value amounts in thousands):
Financial Institution
Trade Date
 
Start Date
 
End Date
 
Barrels of oil per Month
 
Commodity
 
Floor
 
Cap
 
Upfront Costs
 
Fair Value as of March 31, 2013
JP Morgan
3/5/2012
 
5/1/2013
 
5/31/2013
 
50,000

 
Brent
 
$
75.00

 
$
153.50

 
$

 
$

Bank of America
2/7/2012
 
4/1/2013
 
4/30/2013
 
50,000

 
Brent
 
75.00

 
143.50

 

 

Bank of America
12/28/2012
 
4/1/2013
 
4/30/2013
 
50,000

 
Brent
 
75.00

 
143.50

 

 

Bank of America
12/28/2012
 
5/1/2013
 
5/31/2013
 
50,000

 
Brent
 
75.00

 
154.00

 

 

Bank of America
12/28/2012
 
4/1/2013
 
4/30/2013
 
48,810

 
Brent
 
75.00

 
144.50

 

 

Bank of America
12/28/2012
 
5/1/2013
 
5/31/2013
 
48,810

 
Brent
 
75.00

 
153.50

 

 

Bank of America
2/7/2013
 
4/1/2014
 
4/30/2014
 
148,810

 
Brent
 
75.00

 
134.70

 

 
9

Total derivative instrument asset
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
JP Morgan
4/10/2012
 
6/1/2013
 
6/30/2013
 
148,810

 
Brent
 
$
75.00

 
$
146.75

 
$

 
$
4

JP Morgan
9/11/2012
 
11/1/2013
 
11/30/2013
 
148,810

 
Brent
 
75.00

 
137.50

 

 
6

JP Morgan
12/7/2012
 
2/1/2014
 
2/28/2014
 
148,810

 
Brent
 
75.00

 
124.70

 

 
106

JP Morgan
3/7/2013
 
5/1/2014
 
5/31/2014
 
148,810

 
Brent
 
75.00

 
125.75

 

 
74

Bank of America
5/3/2012
 
7/1/2013
 
7/31/2013
 
148,810

 
Brent
 
75.00

 
141.25

 

 
3

Bank of America
8/3/2012
 
10/1/2013
 
10/31/2013
 
148,810

 
Brent
 
75.00

 
130.00

 

 
43

Bank of America
10/4/2012
 
12/1/2013
 
12/31/2013
 
148,810

 
Brent
 
75.00

 
127.50

 

 
66

Bank of America
11/9/2012
 
1/1/2014
 
1/31/2014
 
148,810

 
Brent
 
75.00

 
130.00

 

 
41

Bank of America
12/28/2012
 
9/1/2013
 
9/30/2013
 
148,810

 
Brent
 
75.00

 
117.80

 

 
205

Bank of America
12/28/2012
 
8/1/2013
 
8/31/2013
 
148,810

 
Brent
 
75.00

 
116.25

 

 
221

Bank of America
1/8/2013
 
3/1/2014
 
3/31/2014
 
148,810

 
Brent
 
75.00

 
129.00

 

 
47

Total derivative instrument liability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
816

Total derivative instrument asset and total derivative instrument liability as noted in the table above are included in the consolidated balance sheets as a component of prepaid expenses and other current assets and accrued expenses, respectively.
(5) INVENTORIES AND SUPPLIES
Inventories and supplies consisted of the following (in thousands):
 
March 31,
 
December 31,
 
2013
 
2012
Oil and oil products
$
59,294

 
$
77,735

Supplies and drums
64,102

 
63,540

Solvent and solutions
11,441

 
9,398

Other
9,639

 
20,768

Total inventories and supplies
$
144,476

 
$
171,441


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(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
 
March 31,
 
December 31,
 
2013
 
2012
Land
$
93,387

 
$
106,037

Asset retirement costs (non-landfill)
10,097

 
10,450

Landfill assets
82,580

 
77,952

Buildings and improvements
344,498

 
329,617

Camp equipment
132,900

 
135,827

Vehicles
392,113

 
385,172

Equipment
1,061,968

 
1,061,090

Furniture and fixtures
6,817

 
6,757

Construction in progress
79,589

 
31,780

 
2,203,949

 
2,144,682

Less - accumulated depreciation and amortization
654,143

 
612,919

Total property, plant and equipment, net
$
1,549,806

 
$
1,531,763

(7) GOODWILL AND OTHER INTANGIBLE ASSETS
The changes to goodwill for the three months ended March 31, 2013 were as follows (in thousands):
 
 
2013
Balance at January 1, 2013
 
$
593,771

Decrease from adjustments during the measurement period related to acquisitions
 
(18,018
)
Foreign currency translation
 
(3,347
)
Balance at March 31, 2013
 
$
572,406

The goodwill related to the 2012 acquisitions includes estimates that are subject to change based upon final fair value determinations.     
Below is a summary of amortizable other intangible assets (in thousands):
 
 
March 31, 2013
 
December 31, 2012
 
 
Cost
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Amortization
Period
(in years)
 
Cost
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Amortization
Period
(in years)
Permits
 
$
149,237

 
$
47,219

 
$
102,018

 
20.1
 
$
148,661

 
$
46,282

 
$
102,379

 
21.8
Customer and supplier relationships
 
372,500

 
33,831

 
338,669

 
13.2
 
372,751

 
27,739

 
345,012

 
13.2
Other intangible assets
 
23,378

 
12,667

 
10,711

 
3.6
 
22,027

 
12,121

 
9,906

 
3.6
Total amortizable permits and other intangible assets
 
545,115

 
93,717

 
451,398

 
13.4
 
543,439

 
86,142

 
457,297

 
13.6
Trademarks and trade names
 
115,512

 

 
115,512

 
Indefinite
 
115,520

 

 
115,520

 
Indefinite
Total permits and other intangible assets
 
$
660,627

 
$
93,717

 
$
566,910

 

 
$
658,959

 
$
86,142

 
$
572,817

 

    

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The total amounts assigned and the weighted average amortization period by major intangible asset classes as it relates to the 2012 acquisitions as of March 31, 2013, were as follows (in thousands):
 
Safety-Kleen Total Amount
Assigned
 
Safety-Kleen Weighted
Average
Amortization
Period
(in years)
 
Other 2012 Acquisitions Total Amount
Assigned
 
Other 2012 Acquisitions Weighted
Average
Amortization
Period
(in years)
Permits
$
37,300

 
29.4
 
$
4,100

 
2.5
Customer and supplier relationships
272,155

 
17.7
 
17,575

 
7.7
Other intangible assets
1,571

 
2.5
 
850

 
4.8
Total amortizable permits and other intangible assets
311,026

 
18.0
 
22,525

 
5.4
Trademarks and trade names
113,800

 
Indefinite
 

 
 
Total permits and other intangible assets
$
424,826

 
 
 
$
22,525

 
 
Below is the expected future amortization of the net carrying amount of finite lived intangible assets at March 31, 2013 (in thousands):
Years Ending March 31,
 
Expected
Amortization
2013 (nine months)
 
$
24,931

2014
 
32,584

2015
 
31,580

2016
 
30,774

2017
 
29,982

Thereafter
 
301,547

 
 
$
451,398

(8) ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Insurance
 
$
54,324

 
$
48,243

Interest
 
17,263

 
20,061

Accrued disposal costs
 
1,668

 
1,835

Accrued compensation and benefits
 
52,055

 
70,250

Income, real estate, sales and other taxes
 
32,454

 
35,640

Other
 
54,660

 
56,400

 
 
$
212,424

 
$
232,429


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(9) CLOSURE AND POST-CLOSURE LIABILITIES
The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) for the three months ended March 31, 2013 were as follows (in thousands):
 
 
Landfill
Retirement
Liability
 
Non-Landfill
Retirement
Liability
 
Total
Balance at January 1, 2013
 
$
26,658

 
$
27,590

 
$
54,248

Adjustments during the measurement period related to acquisitions
 

 
(10,201
)
 
(10,201
)
New asset retirement obligations
 
860

 

 
860

Accretion
 
739

 
416

 
1,155

Changes in estimates recorded to statement of income
 
(16
)
 
58

 
42

Changes in estimates recorded to balance sheet
 
369

 

 
369

Expenditures
 
(934
)
 
(70
)
 
(1,004
)
Currency translation and other
 
(93
)
 
(23
)
 
(116
)
Balance at March 31, 2013
 
$
27,583

 
$
17,770

 
$
45,353

All of the landfill facilities included in the above were active as of March 31, 2013. New asset retirement obligations incurred during the first quarter of 2013 were discounted at the credit-adjusted risk-free rate of 6.60%. There were no significant charges (benefits) in 2013 resulting from changes in estimates for closure and post-closure liabilities.
(10) REMEDIAL LIABILITIES 
The changes to remedial liabilities for the three months ended March 31, 2013 were as follows (in thousands):
     
 
 
Remedial
Liabilities for
Landfill Sites
 
Remedial
Liabilities for
Inactive Sites
 
Remedial
Liabilities
(Including
Superfund) for
Non-Landfill
Operations
 
Total
Balance at January 1, 2013
 
$
5,829

 
$
71,079

 
$
90,312

 
$
167,220

Adjustments during the measurement period related to acquisitions
 

 
8,578

 
2,072

 
10,650

Accretion
 
70

 
826

 
783

 
1,679

Changes in estimates recorded to statement of income
 
(21
)
 
(165
)
 
86

 
(100
)
Expenditures
 
(14
)
 
(1,843
)
 
(2,430
)
 
(4,287
)
Currency translation and other
 
(67
)
 
(33
)
 
(494
)
 
(594
)
Balance at March 31, 2013
 
$
5,797

 
$
78,442

 
$
90,329

 
$
174,568

There were no significant charges (benefits) in 2013 resulting from the changes in estimates for remedial liabilities.

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(11) FINANCING ARRANGEMENTS 
The following table is a summary of the Company’s financing arrangements (in thousands):
 
 
 
March 31,
2013
 
December 31,
2012
Senior unsecured notes, at 5.25%, due August 1, 2020
 
$
800,000

 
$
800,000

Senior unsecured notes, at 5.125%, due June 1, 2021
 
600,000

 
600,000

Revolving credit facility, due January 17, 2018
 

 

Long-term obligations
 
$
1,400,000

 
$
1,400,000

   
On January 17, 2013, the Company increased its revolving credit facility to provide for maximum borrowings of up to $400.0 million (with a $325.0 million sub-limit for letters of credit). At March 31, 2013, the revolving credit facility had no outstanding loans, $262.3 million available to borrow and $137.7 million of letters of credit outstanding.
The financing arrangements and principal terms of the Company's $800.0 million principal amount of 5.25% senior unsecured notes due 2020 ("2020 Notes") and $600.0 million principal amount of 5.125% senior unsecured notes due 2021 ("2021 Notes") which were outstanding at March 31, 2013, and the Company's amended $400.0 million revolving credit facility, are discussed further in Note 11, “Financing Arrangements,” in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.
(12) INCOME TAXES 
The Company’s effective tax rate for the three months ended March 31, 2013 was 32.2% compared to 36.1% for the same period in 2012.
As of March 31, 2013, the Company had recorded $3.0 million of liabilities for unrecognized tax benefits and $1.5 million of interest. As of December 31, 2012, the Company had recorded $3.5 million of liabilities for unrecognized tax benefits and $1.4 million of interest. 
Due to expiring statute of limitation periods, the Company believes that total unrecognized tax benefits will decrease by approximately $3.8 million within the next twelve months. The $3.8 million (which includes interest of $1.2 million) is related to various foreign and state tax laws and, if realized, will be recorded in earnings and therefore will impact the effective income tax rate.
(13) EARNINGS PER SHARE     
The following are computations of basic and diluted earnings per share (in thousands except for per share amounts):
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
Numerator for basic and diluted earnings per share:
 
 

 
 

Net income
 
$
10,502

 
$
32,015

 
 
 
 
 
Denominator:
 
 

 
 

Basic shares outstanding
 
60,464

 
53,227

Dilutive effect of equity-based compensation awards
 
166

 
261

Dilutive shares outstanding
 
60,630

 
53,488

 
 
 
 
 
Basic earnings per share:
 
$
0.17

 
$
0.60

 
 
 

 
 

Diluted earnings per share:
 
$
0.17

 
$
0.60

For the three months ended March 31, 2013, the dilutive effect of all then outstanding options, restricted stock and performance awards is included in the EPS calculations above except for 61,000 outstanding performance stock awards for which the performance criteria were not attained at that time. For the three months ended March 31, 2012, the EPS calculations above

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include the dilutive effects of all then outstanding options, restricted stock, and performance awards except for 69,000 outstanding performance stock awards for which the performance criteria were not attained at that time.
(14) ACCUMULATED OTHER COMPREHENSIVE INCOME
Other comprehensive income includes translation adjustments of foreign currency financial statements, unrealized gains (losses) on long-term investments and changes in unfunded pension liabilities. The components of other comprehensive (loss) income and related tax effects for the three months ended March 31, 2013 and 2012 were as follows (in thousands):
 
 
For the Three Months Ended
 
For the Three Months Ended
 
 
March 31, 2013
 
March 31, 2012
 
 
Gross
 
Tax Effect
 
Net of Tax
 
Gross
 
Tax Effect
 
Net of Tax
Foreign currency translation
 
$
(23,312
)
 
$

 
$
(23,312
)
 
$
14,817

 
$

 
$
14,817

Unrealized gain (loss) on available-for-sale securities
 
(619
)
 
70

 
(549
)
 
404

 
(41
)
 
363

Other comprehensive (loss) income
 
$
(23,931
)
 
$
70

 
$
(23,861
)
 
$
15,221

 
$
(41
)
 
$
15,180

The components of accumulated other comprehensive income, net of tax, were as follows (in thousands):
 
Foreign Currency Translation
 
Unrealized Gain (Loss) on Available-For-Sale Securities
 
Unfunded Pension Liability
 
Total
Balance, January 1, 2013
$
50,627

 
$
660

 
$
(1,655
)
 
$
49,632

Other comprehensive loss, net of tax
(23,312
)
 
(549
)
 

 
(23,861
)
Balance, March 31, 2013
$
27,315

 
$
111

 
$
(1,655
)
 
$
25,771

There were no reclassifications from accumulated other comprehensive income during the three months ended March 31, 2013.
(15) STOCK-BASED COMPENSATION
The following table summarizes the total number and type of awards granted during the three months ended March 31, 2013, as well as the related weighted-average grant-date fair values:
 
 
Three Months Ended
 
 
March 31, 2013
 
 
Shares
 
Weighted Average
Grant-Date
Fair Value
Restricted stock awards
 
151,350

 
$
55.40

Total awards
 
151,350

 
 

(16) COMMITMENTS AND CONTINGENCIES 
Legal and Administrative Proceedings 
The Company’s waste management services are regulated by federal, state, provincial and local laws enacted to regulate discharge of materials into the environment, remediation of contaminated soil and groundwater or otherwise protect the environment. This ongoing regulation results in the Company frequently becoming a party to legal or administrative proceedings involving all levels of governmental authorities and other interested parties. The issues involved in such proceedings generally relate to applications for permits and licenses by the Company and conformity with legal requirements, alleged violations of existing permits and licenses, or alleged responsibility arising under federal or state Superfund laws to remediate contamination at properties owned either by the Company or by other parties (“third party sites”) to which either the Company or prior owners of certain of the Company’s facilities shipped wastes. 
At March 31, 2013 and December 31, 2012, the Company had recorded reserves of $39.0 million and $38.6 million,

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respectively, in the Company's financial statements for actual or probable liabilities related to the legal and administrative proceedings in which the Company was then involved, the principal of which are described below. At March 31, 2013 and December 31, 2012, the Company also believed that it was reasonably possible that the amount of these potential liabilities could be as much as $3.5 million more, respectively. The Company periodically adjusts the aggregate amount of these reserves when these actual or probable liabilities are paid or otherwise discharged, new claims arise, or additional relevant information about existing or probable claims becomes available. As of March 31, 2013, the $39.0 million of reserves consisted of (i) $34.7 million related to pending legal or administrative proceedings, including Superfund liabilities, which were included in remedial liabilities on the consolidated balance sheets and (ii) $4.3 million primarily related to federal and state enforcement actions, which were included in accrued expenses on the consolidated balance sheets.
As of March 31, 2013, the principal legal and administrative proceedings in which the Company was involved, or which had been terminated during 2012, were as follows:
Ville Mercier.    In September 2002, the Company acquired the stock of a subsidiary (the "Mercier Subsidiary") which owns a hazardous waste incinerator in Ville Mercier, Quebec (the "Mercier Facility"). The property adjacent to the Mercier Facility, which is also owned by the Mercier Subsidiary, is now contaminated as a result of actions dating back to 1968, when the Government of Quebec issued to a company unrelated to the Mercier Subsidiary two permits to dump organic liquids into lagoons on the property. By 1972, groundwater contamination had been identified, and the Quebec government provided an alternate water supply to the municipality of Ville Mercier.
In 1999, Ville Mercier and three neighboring municipalities filed separate legal proceedings against the Mercier Subsidiary and the Government of Quebec. The lawsuits assert that the defendants are jointly and severally responsible for the contamination of groundwater in the region, which they claim caused each municipality to incur additional costs to supply drinking water for their citizens since the 1970's and early 1980's. The four municipalities claim a Canadian dollar ("CDN") total of $1.6 million as damages for additional costs to obtain drinking water supplies and seek an injunctive order to obligate the defendants to remediate the groundwater in the region. The Quebec Government also sued the Mercier Subsidiary to recover approximately $17.4 million (CDN) of alleged past costs for constructing and operating a treatment system and providing alternative drinking water supplies.
On September 26, 2007, the Quebec Minister of Sustainable Development, Environment and Parks issued a Notice pursuant to Section 115.1 of the Environment Quality Act, superseding Notices issued in 1992, which are the subject of the pending litigation. The more recent Notice notifies the Mercier Subsidiary that, if the Mercier Subsidiary does not take certain remedial measures at the site, the Minister intends to undertake those measures at the site and claim direct and indirect costs related to such measures. The Mercier Subsidiary continues to assert that it has no responsibility for the groundwater contamination in the region and will contest any action by the Ministry to impose costs for remedial measures on the Mercier Subsidiary. The Company also continues to pursue settlement options. At March 31, 2013 and December 31, 2012, the Company had accrued $14.1 million and $14.2 million, respectively, for remedial liabilities relating to the Ville Mercier legal proceedings.
Safety-Kleen Legal Proceedings. On December 28, 2012, the Company acquired Safety-Kleen and thereby became subject to the legal proceedings in which Safety-Kleen was a party on that date. In addition to certain Superfund proceedings in which Safety-Keen has been named as a potentially responsible party as described below under “Superfund Proceedings,” the principal such legal proceedings involving Safety-Kleen which were outstanding as of March 31, 2013 are as follows:
Product Liability Cases - Safety-Kleen is named as a defendant in various lawsuits that are currently pending in various courts and jurisdictions throughout the United States, including approximately 66 proceedings (including cases which have been settled but not formally dismissed) as of March 31, 2013, wherein persons claim personal injury resulting from the use of Safety-Kleen's parts cleaning equipment or cleaning products. These proceedings typically involve allegations that the solvent used in Safety-Kleen's parts cleaning equipment contains contaminants and/or that Safety-Kleen's recycling process does not effectively remove the contaminants that become entrained in the solvent during their use. In addition, certain claimants assert that Safety-Kleen failed to 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. Safety-Kleen maintains insurance that it believes will provide coverage for these claims (over amounts accrued for self-insured retentions and deductibles in certain limited cases), except for punitive damages to the extent not insurable under state law or excluded from insurance coverage. Safety-Kleen believes that these claims lack merit and has historically vigorously defended, and intends to continue to vigorously defend, itself and the safety of its products against all of these claims. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, Safety-Kleen is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of March 31, 2013. From December 31, 2012 to March 31, 2013, 16 product liability claims were settled or dismissed. Due to the nature of these claims and the related insurance, Safety-Kleen did not incur any expense as Safety-Kleen's insurance provided coverage in full for all such claims. Safety-Kleen may be named in similar, additional lawsuits in the future, including claims for which insurance coverage may not be available.    

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Fee Class Action Claims. In October 2010, two customers filed a complaint, individually and on behalf of all similarly situated customers in the State of Alabama, in state court in Alabama alleging that Safety-Kleen improperly assessed fuel surcharges and extended area service fees. Safety-Kleen disputes the basis of the claims on numerous grounds, including that Safety-Kleen has contracts with numerous customers authorizing the assessment of such fees and that in cases where no contract exists Safety-Kleen provides customers with a document at the time of service reflecting the assessment of the fee, followed by an invoice itemizing the fee. It is Safety-Kleen's position that it had the right to assess fuel surcharges, that the customers consented to the charges and that the surcharges were voluntarily paid by the customers when presented with an invoice. The lawsuit is still in its initial stages of discovery. The class related fact discovery must now be completed by September 4, 2013, and a hearing on class certification will be held in early to mid-2014. In late June 2012, a nearly identical lawsuit was filed by the same law firm on behalf of a California-based customer. The lawsuit contends, under various state law theories, that Safety-Kleen impermissibly assessed fuel surcharges and late payment fees, and seeks certification of a class of California customers only. Safety-Kleen will assert the same defenses as in the Alabama litigation. In December 2012, a similar suit was filed by the same law firm on behalf of a Missouri-based customer which contends under various state law theories that Safety-Kleen impermissibly assessed fuel surcharges and seeks certification of a class of Missouri customers only. Safety-Kleen will assert the same defenses as in the Alabama and California cases. The Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of March 31, 2013, and no reserve has been recorded.
Superfund Proceedings
The Company has been notified that either the Company (which, since December 28, 2012, includes Safety-Kleen) or the prior owners of certain of the Company's facilities for which the Company may have certain indemnification obligations have been identified as potentially responsible parties ("PRPs") or potential PRPs in connection with 120 sites which are subject to or are proposed to become subject to proceedings under federal or state Superfund laws. Of the 120 sites, two involve facilities that are now owned by the Company and 118 involve third party sites to which either the Company or the prior owners shipped wastes. In connection with each site, the Company has estimated the extent, if any, to which it may be subject, either directly or as a result of any such indemnification provisions, for cleanup and remediation costs, related legal and consulting costs associated with PRP investigations, settlements, and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability (if any) of the Company or the prior owners of certain of the Company's facilities to contribute a portion of the cleanup costs, the assumptions that must be made in calculating the estimated cost and timing of remediation, the identification of other PRPs and their respective capability and obligation to contribute to remediation efforts, and the existence and legal standing of indemnification agreements (if any) with prior owners, which may either benefit the Company or subject the Company to potential indemnification obligations.
The Company's potential liability for cleanup costs at the two facilities now owned by the Company and at 35 (the "Listed Third Party Sites") of the 118 third party sites arose out of the Company's 2002 acquisition of substantially all of the assets (the "CSD assets") of the Chemical Services Division of Safety-Kleen Corp. As part of the purchase price for the CSD assets, the Company became liable as the owner of these two facilities and also agreed to indemnify the prior owners of the CSD assets against their share of certain cleanup costs for the Listed Third Party Sites payable to governmental entities under federal or state Superfund laws. Of the 35 Listed Third Party Sites, six are currently requiring expenditures on remediation, 16 are now settled, and 13 are not currently requiring expenditures on remediation. The status of the two facilities owned by the Company (the Wichita Property and the BR Facility) are further described below.
The 118 Superfund sites described above include 68 sites for which the Company had been notified it is a PRP or potential PRP prior to the Company's acquisition of Safety-Kleen on December 28, 2012, and an additional 50 sites at which Safety-Kleen had been notified it is a PRP or potential PRP prior to such acquisition. The total number of Superfund sites at which the Company had at March 31, 2013 potential liability and the total dollar amount of such estimated liability relating to those sites as described above have been increased to reflect the additional potential Superfund liabilities to which the Company became subject as a result of the Safety-Kleen acquisition. One of the third party sites (the Marine Shale site) is further described below.
Wichita Property.    The Company acquired in 2002 as part of the CSD assets a service center located in Wichita, Kansas (the "Wichita Property"). The Wichita Property is one of several properties located within the boundaries of a 1,400 acre state-designated Superfund site in an old industrial section of Wichita known as the North Industrial Corridor Site. Along with numerous other PRPs, the former owner executed a consent decree relating to such site with the EPA, and the Company is continuing its ongoing remediation program for the Wichita Property in accordance with that consent decree. The Company also acquired rights under an indemnification agreement between the former owner and an earlier owner of the Wichita Property, which the Company anticipates but cannot guarantee will be available to reimburse certain such cleanup costs.
BR Facility.    The Company acquired in 2002 as part of the CSD assets a former hazardous waste incinerator and landfill in Baton Rouge (the "BR Facility"), for which operations had been previously discontinued by the prior owner. In

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September 2007, the EPA issued a special notice letter to the Company related to the Devil's Swamp Lake Site ("Devil's Swamp") in East Baton Rouge Parish, Louisiana. Devil's Swamp includes a lake located downstream of an outfall ditch where wastewater and stormwater have been discharged, and Devil's Swamp is proposed to be included on the National Priorities List due to the presence of Contaminants of Concern ("COC") cited by the EPA. These COCs include substances of the kind found in wastewater and storm water discharged from the BR Facility in past operations. The EPA originally requested COC generators to submit a good faith offer to conduct a remedial investigation feasibility study directed towards the eventual remediation of the site. The Company is currently performing corrective actions at the BR Facility under an order issued by the Louisiana Department of Environmental Quality (the "LDEQ"), and has begun conducting the remedial investigation and feasibility study under an order issued by the EPA. The Company cannot presently estimate the potential additional liability for the Devil's Swamp cleanup until a final remedy is selected by the EPA.
Marine Shale Site.    Prior to 1996, Marine Shale Processors, Inc. ("Marine Shale") operated a kiln in Amelia, Louisiana which incinerated waste producing a vitrified aggregate as a by-product. Marine Shale contended that its operation recycled waste into a useful product, i.e., vitrified aggregate, and therefore was exempt from regulation under the RCRA and permitting requirements as a hazardous waste incinerator under applicable federal and state environmental laws. The EPA contended that Marine Shale was a "sham-recycler" subject to the regulation and permitting requirements as a hazardous waste incinerator under RCRA, that its vitrified aggregate by-product was a hazardous waste, and that Marine Shale's continued operation without required permits was illegal. Litigation between the EPA and Marine Shale began in 1990 and continued until July 1996, when the U.S. Fifth Circuit Court of Appeals ordered Marine Shale to shut down its operations.
Certain of the former owners of the CSD assets were major customers of Marine Shale, but the Marine Shale site was not included as a Listed Third Party Site in connection with the Company's acquisition of the CSD assets and Clean Harbors was never a customer of Marine Shale. A Safety-Kleen subsidiary was, however, a Marine Shale customer and has been named a PRP. On May 11, 2007, the EPA and the LDEQ issued a special notice to the Company and other PRPs, seeking a good faith offer to address site remediation at the former Marine Shale facility. The Company has joined with other parties to form a group (the "Site Group") to retain common counsel and participate in further negotiations with the EPA and the LDEQ directed towards the eventual remediation of the Marine Shale site. The Site Group made a good faith settlement offer to the EPA on November 29, 2007, and negotiations among the EPA, the LDEQ and the Site Group with respect to the Marine Shale site are ongoing. At March 31, 2013 and December 31, 2012, the amount of the Company's reserves relating to the Marine Shale site were $4.5 million and $4.4 million, respectively.
Certain Other Third Party Sites.    At 11 of the 118 third party sites, Clean Harbors has an indemnification agreement with ChemWaste, a former subsidiary of Waste Management, Inc., and at five additional of those third party sites, Safety-Kleen has a similar indemnification agreement with McKesson Corporation. These agreements indemnify the Company (which now includes Safety-Kleen) with respect to any liability at the 16 sites for waste disposed prior to the Company's (or Safety-Kleen's) acquisition of the former subsidiaries of Waste Management or McKesson which had shipped wastes to those sites. Accordingly, Waste Management or McKesson are paying all costs of defending those subsidiaries in those 16 cases, including legal fees and settlement costs. However, there can be no guarantee that the Company's ultimate liabilities for those sites will not exceed the amount recorded or that indemnities applicable to any of these sites will be available to pay all or a portion of related costs. Except for the indemnification agreement which the Company holds from ChemWaste and McKesson, the Company does not have an indemnity agreement with respect to any of the 118 third party sites discussed above. In addition to Wichita, the BR Facility, and Marine Shale, Clean Harbors has 12 sites at which it believes its potential liability could exceed $100,000.
Federal, State and Provincial Enforcement Actions
From time to time, the Company pays fines or penalties in regulatory proceedings relating primarily to waste treatment, storage or disposal facilities. As of March 31, 2013 and December 31, 2012, there were four proceedings for which the Company reasonably believed that the sanctions could equal or exceed $100,000. The Company believes that the fines or other penalties in these or any of the other regulatory proceedings will, individually or in the aggregate, not have a material effect on its financial condition, results of operations or cash flows.
(17) SEGMENT REPORTING 
During the first quarter of 2013, the Company adjusted its operating segments to integrate the business activities of Safety-Kleen, acquired in December 2012, and to incorporate other changes made in 2013 to the manner in which the Company manages its business, makes operating decisions and assesses its performance. The Company's operations are now managed in five reportable segments: Technical Services, Oil Re-refining and Recycling, SK Environmental Services, Industrial and Field Services and Oil and Gas Field Services. The prior year segment information has been recast to conform to the current year presentation.

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Performance of the segments is evaluated on several factors, of which the primary financial measure is “Adjusted EBITDA,” which consists of net income plus accretion of environmental liabilities, depreciation and amortization, net interest expense, provision for income taxes and pre-tax, non-cash acquisition accounting adjustments. Also excluded is other expense (income) as this amount is not considered part of usual business operations. Transactions between the segments are accounted for at the Company’s estimate of fair value based on similar transactions with outside customers. 
The operations not managed through the Company’s five reportable segments are recorded as “Corporate Items.” Corporate Items revenues consist of two different operations for which the revenues are insignificant. Corporate Items cost of revenues represents certain central services that are not allocated to the five segments for internal reporting purposes. Corporate Items selling, general and administrative expenses include typical corporate items such as legal, accounting and other items of a general corporate nature that are not allocated to the Company’s five reportable segments. Corporate Items revenues for the three months ended March 31, 2013 includes a one-time, non-cash reduction of approximately $10.2 million due to the impact of acquisition accounting adjustments on Safety-Kleen's historical deferred revenue balance at December 28, 2012. The revenue amounts of the five reportable segments for the three months ended March 31, 2013 exclude such adjustments to maintain comparability with future operating results and reflect how the Company manages the business.
The following table reconciles third party revenues to direct revenues for the three months ended March 31, 2013 and 2012 (in thousands). Third party revenue is revenue billed to outside customers by a particular segment. Direct revenue is the revenue allocated to the segment performing the provided service. The Company analyzes results of operations based on direct revenues because the Company believes that these revenues and related expenses best reflect the manner in which operations are managed. Intersegment revenues represent the sharing of third party revenues among the segments based on products and services provided by each segment as if the products and services were sold directly to the third party. The intersegment revenues are shown net. The negative intersegment revenues are due to more transfers out of customer revenues to other segments than transfers in of customer revenues from other segments.
 
 
For the Three Months Ended March 31, 2013
 
 
Technical
Services
 
Oil Re-refining and Recycling
 
SK Environmental Services
 
Industrial and Field
Services
 
Oil and Gas Field
Services
 
Corporate
Items
 
Totals
Third party revenues
 
$
233,939

 
$
146,931

 
$
152,955

 
$
221,418

 
$
116,696

 
$
(9,776
)
 
$
862,163

Intersegment revenues, net
 
24,419

 
(56,561
)
 
41,405

 
(13,356
)
 
4,093

 

 

Corporate Items, net
 
852

 

 
84

 
138

 
(151
)
 
(923
)
 

Direct revenues
 
$
259,210

 
$
90,370

 
$
194,444

 
$
208,200

 
$
120,638

 
$
(10,699
)
 
$
862,163

 
 
For the Three Months Ended March 31, 2012
 
 
Technical
Services
 
Oil Re-refining and Recycling
 
SK Environmental Services
 
Industrial and Field
Services
 
Oil and Gas Field
Services
 
Corporate
Items
 
Totals
Third party revenues
 
$
221,637

 
$

 
$

 
$
202,779

 
$
146,905

 
$
701

 
$
572,022

Intersegment revenues, net
 
9,067

 

 

 
(11,221
)
 
2,154

 

 

Corporate Items, net
 
492

 

 

 
12

 
(231
)
 
(273
)
 

Direct revenues
 
$
231,196

 
$

 
$

 
$
191,570

 
$
148,828

 
$
428

 
$
572,022


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The following table presents information used by management by reportable segment (in thousands). The Company does not allocate interest expense, income taxes, depreciation, amortization, accretion of environmental liabilities, pre-tax, non-cash acquisition accounting adjustments, and other (income) expense, to its segments.
    
 
 
For the Three Months Ended
 
 
 
March 31,
 
 
 
2013
 
2012
 
Adjusted EBITDA:
 
 

 
 

 
Technical Services
 
$
60,045

 
$
51,911

 
Oil Re-refining and Recycling
 
15,312

 

 
SK Environmental Services
 
27,040

 

 
Industrial and Field Services
 
36,346

 
34,078

 
Oil and Gas Field Services
 
27,551

 
40,196

 
Corporate Items
 
(55,066
)
 
(25,237
)
 
Total
 
$
111,228

 
$
100,948

 
 
 
 
 
 
 
Reconciliation to Consolidated Statements of Income:
 
 

 
 

 
Pre-tax, non-cash acquisition accounting adjustments
 
$
13,559

 
$

 
Accretion of environmental liabilities
 
2,835

 
2,416

 
Depreciation and amortization
 
60,006

 
36,831

 
Income from operations
 
34,828

 
61,701

 
Other (income) expense
 
(525
)
 
299

 
Interest expense, net of interest income
 
19,873

 
11,272

 
Income before provision for income taxes
 
$
15,480

 
$
50,130

 



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The following table presents assets by reportable segment and in the aggregate (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Property, plant and equipment, net
 
 

 
 

Technical Services
 
$
389,594

 
$
402,260

Oil Re-refining and Recycling
 
223,187

 
224,289

SK Environmental Services
 
203,671

 
195,172

Industrial and Field Services
 
387,502

 
371,335

Oil and Gas Field Services
 
251,126

 
257,985

Corporate Items
 
94,726

 
80,722

Total property, plant and equipment, net
 
$
1,549,806

 
$
1,531,763

Intangible assets:
 
 

 
 

Technical Services
 
 

 
 

Goodwill
 
$
47,929

 
$
48,157

Permits and other intangibles, net
 
84,514

 
85,842

Total Technical Services
 
132,443

 
133,999

Oil Re-refining and Recycling
 
 

 
 

Goodwill
 
206,095

 
215,704

Permits and other intangibles, net
 
221,783

 
222,182

Total Oil Re-refining and Recycling
 
427,878

 
437,886

SK Environmental Services
 
 

 
 

Goodwill
 
141,809

 
148,422

Permits and other intangibles, net
 
190,130

 
190,472

Total SK Environmental Services
 
331,939

 
338,894

Industrial and Field Services
 
 

 
 

Goodwill
 
137,564

 
141,726

Permits and other intangibles, net
 
39,535

 
41,143

Total Industrial and Field Services
 
177,099

 
182,869

Oil and Gas Field Services