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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 JUNE 30, 2016
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
 
57,495,468
(Class)
 
(Outstanding as of July 29, 2016)



CLEAN HARBORS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents



CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

 
June 30, 2016
 
December 31, 2015
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
352,923

 
$
184,708

Accounts receivable, net of allowances aggregating $28,436 and $31,426, respectively
503,749

 
496,004

Unbilled accounts receivable
29,119

 
25,940

Deferred costs
21,261

 
18,758

Inventories and supplies
162,404

 
149,521

Prepaid expenses and other current assets
49,678

 
46,265

Total current assets
1,119,134

 
921,196

Property, plant and equipment, net
1,594,987

 
1,532,467

Other assets:
 
 
 
Deferred financing costs
1,412

 
1,847

Goodwill
461,491

 
453,105

Permits and other intangibles, net
492,224

 
506,818

Other
23,133

 
15,995

Total other assets
978,260

 
977,765

Total assets
$
3,692,381

 
$
3,431,428

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
222,302

 
$
241,183

Deferred revenue
70,263

 
61,882

Accrued expenses
203,813

 
193,660

Current portion of closure, post-closure and remedial liabilities
24,043

 
20,395

Total current liabilities
520,421

 
517,120

Other liabilities:
 
 
 
Closure and post-closure liabilities, less current portion of $8,043 and $7,229, respectively
51,143

 
49,020

Remedial liabilities, less current portion of $16,000 and $13,166, respectively
114,291

 
118,826

Long-term obligations
1,631,881

 
1,382,543

Deferred taxes, unrecognized tax benefits and other long-term liabilities
258,302

 
267,637

Total other liabilities
2,055,617

 
1,818,026

Commitments and contingent liabilities (See Note 14)


 


Stockholders’ equity:
 
 
 
Common stock, $.01 par value:
 
 
 
Authorized 80,000,000; shares issued and outstanding 57,495,095 and 57,593,201
shares, respectively
575

 
576

Shares held under employee participation plan
(469
)
 
(469
)
Additional paid-in capital
730,709

 
738,401

Accumulated other comprehensive loss
(210,233
)
 
(254,892
)
Accumulated earnings
595,761

 
612,666

Total stockholders’ equity
1,116,343

 
1,096,282

Total liabilities and stockholders’ equity
$
3,692,381

 
$
3,431,428

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 OPERATIONS

(in thousands except per share amounts)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
Service revenues
$
584,562

 
$
801,347

 
$
1,114,793

 
$
1,397,677

Product revenues
112,948

 
134,881

 
218,800

 
271,050

Total revenues
697,510

 
936,228

 
1,333,593

 
1,668,727

Cost of revenues (exclusive of items shown separately below)
 
 
 
 
 
 
 
Service revenues
388,684

 
544,870

 
762,670

 
961,260

Product revenues
91,318

 
107,818

 
181,611

 
237,935

Total cost of revenues
480,002

 
652,688

 
944,281

 
1,199,195

Selling, general and administrative expenses
107,063

 
120,418

 
211,547

 
228,133

Accretion of environmental liabilities
2,548

 
2,599

 
5,053

 
5,218

Depreciation and amortization
73,393

 
67,773

 
142,295

 
136,129

Goodwill impairment charge

 
31,992

 

 
31,992

Income from operations
34,504

 
60,758

 
30,417

 
68,060

Other expense
(189
)
 
(660
)
 
(539
)
 
(251
)
Interest expense, net of interest income of $225, $188, $375 and $339, respectively
(21,647
)
 
(19,249
)
 
(40,627
)
 
(38,687
)
Income (loss) before provision for income taxes
12,668

 
40,849

 
(10,749
)
 
29,122

Provision for income taxes
8,702

 
30,454

 
6,156

 
25,816

Net income (loss)
$
3,966

 
$
10,395

 
$
(16,905
)
 
$
3,306

Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.07

 
$
0.18

 
$
(0.29
)
 
$
0.06

Diluted
$
0.07

 
$
0.18

 
$
(0.29
)
 
$
0.06

Shares used to compute earnings (loss) per share - Basic
57,549

 
58,590

 
57,599

 
58,732

Shares used to compute earnings (loss) per share - Diluted
57,678

 
58,710

 
57,599

 
58,832


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 COMPREHENSIVE INCOME (LOSS)

(in thousands)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Net income (loss)
$
3,966

 
$
10,395

 
$
(16,905
)
 
$
3,306

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(1,178
)
 
12,231

 
44,659

 
(65,172
)
Other comprehensive (loss) income
(1,178
)
 
12,231

 
44,659

 
(65,172
)
Comprehensive income (loss)
$
2,788

 
$
22,626

 
$
27,754

 
$
(61,866
)

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)
 
Six Months Ended
 
June 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(16,905
)
 
$
3,306

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
142,295

 
136,129

Goodwill impairment charge

 
31,992

Allowance for doubtful accounts
3,228

 
4,536

Amortization of deferred financing costs and debt discount
1,772

 
1,639

Accretion of environmental liabilities
5,053

 
5,218

Changes in environmental liability estimates
(315
)
 
887

Deferred income taxes
(6,521
)
 
(908
)
Stock-based compensation
4,739

 
6,146

Excess tax benefit of stock-based compensation
(2
)
 
(102
)
Net tax deficiency on stock based awards
(603
)
 
(72
)
Other expense
1,049

 
251

Environmental expenditures
(6,454
)
 
(11,532
)
Changes in assets and liabilities, net of acquisitions
 
 
 
Accounts receivable and unbilled accounts receivable
993

 
(133,031
)
Inventories and supplies
(1,113
)
 
17,694

Other current assets
(4,789
)
 
(816
)
Accounts payable
(8,397
)
 
108,639

Other current and long-term liabilities
6,021

 
23,839

Net cash from operating activities
120,051

 
193,815

Cash flows used in investing activities:
 
 
 
Additions to property, plant and equipment
(123,529
)
 
(124,145
)
Proceeds from sales of fixed assets
2,668

 
2,646

Acquisitions, net of cash acquired
(58,989
)
 
(79,610
)
Additions to intangible assets, including costs to obtain or renew permits
(973
)
 
(3,088
)
Purchases of available-for-sale securities
(598
)
 

Net cash used in investing activities
(181,421
)
 
(204,197
)
Cash flows from (used in) financing activities:
 
 
 
Change in uncashed checks
(11,022
)
 
(22,160
)
Proceeds from exercise of stock options
184

 
397

Issuance of restricted shares, net of shares remitted
(1,879
)
 
(1,837
)
Repurchases of common stock
(10,134
)
 
(32,203
)
Deferred financing costs paid
(2,614
)
 

Payments on capital leases

 
(471
)
Excess tax benefit of stock-based compensation
2

 
102

Issuance of senior secured notes, including premium
250,625

 

Net cash from (used in) financing activities
225,162

 
(56,172
)
Effect of exchange rate change on cash
4,423

 
(6,704
)
Increase (decrease) in cash and cash equivalents
168,215

 
(73,258
)
Cash and cash equivalents, beginning of period
184,708

 
246,879

Cash and cash equivalents, end of period
$
352,923

 
$
173,621

Supplemental information:
 
 
 
Cash payments for interest and income taxes:
 
 
 
Interest paid
$
44,275

 
$
37,411

Income taxes paid
23,872

 
3,068

Non-cash investing and financing activities:
 
 
 
Property, plant and equipment accrued
24,187

 
34,799

Receivable for estimated purchase price adjustment

 
2,518

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

4


CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 
Common Stock
 
Shares Held
Under
Employee
Participation
Plan
 
 
 
Accumulated
Other
Comprehensive Loss
 
 
 
 
 
Number
of
Shares
 
$ 0.01
Par
Value
 
 
Additional
Paid-in
Capital
 
 
Accumulated
Earnings
 
Total
Stockholders’
Equity
Balance at January 1, 2016
57,593

 
$
576

 
$
(469
)
 
$
738,401

 
$
(254,892
)
 
$
612,666

 
$
1,096,282

Net loss

 

 

 

 

 
(16,905
)
 
(16,905
)
Other comprehensive income

 

 

 

 
44,659

 

 
44,659

Stock-based compensation

 

 

 
4,739

 

 

 
4,739

Issuance of restricted shares, net of shares remitted
97

 
1

 

 
(1,880
)
 

 

 
(1,879
)
Repurchases of common stock
(203
)
 
(2
)
 

 
(10,132
)
 

 

 
(10,134
)
Exercise of stock options
8

 

 

 
184

 

 

 
184

Net tax deficiency on stock based awards

 

 

 
(603
)
 

 

 
(603
)
Balance at June 30, 2016
57,495

 
$
575

 
$
(469
)
 
$
730,709

 
$
(210,233
)
 
$
595,761

 
$
1,116,343



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 are unaudited and include the accounts of Clean Harbors, Inc. and its subsidiaries (collectively, “Clean Harbors,” the “Company” or "we") and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Management has made estimates and assumptions affecting the amounts reported in the Company's consolidated interim financial statements and accompanying footnotes, actual results could differ from those estimates and judgments. The results for interim periods are not necessarily indicative of results for the entire year or any other interim periods. The financial statements presented herein should be read in connection with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which includes the audited consolidated balance sheet as of December 31, 2015 from which the one presented herein was derived.
(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, 2015. There have been no material changes in these policies or their application.
Recent Accounting Pronouncements
Standards implemented
In February 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2015-02, Consolidation (Topic 810). The amendment provides guidance regarding amendments to the consolidation analysis. The adoption of ASU 2015-02 as of January 1, 2016 did not have an impact on the Company's consolidated financial statements.

In September 2015, FASB issued ASU 2015-16, Business Combinations (Topic 805). The amendment provides guidance to simplify the accounting for adjustments made to provisional amounts recognized in a business combination. This amendment eliminates the requirement to retrospectively account for those adjustments. ASU 2015-16 should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update. The adoption of ASU 2015-16 as of January 1, 2016 did not have an impact on the Company's consolidated financial statements.
Standards to be implemented
The Company is currently evaluating the impact that the below standards to be implemented will have on the Company's consolidated financial statements.

In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). The amendment increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 should be applied using a modified retrospective approach and early adoption is permitted. The amendments in this update are effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2018.

In March 2016, FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606). ASU 2016-08 reduces the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance, as well as the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of Update 2014-09, Revenue from Contracts with Customers (Topic 606).

In March 2016, FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). The amendment simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. ASU 2016-09 allows for retrospective or prospective application and early adoption is permitted. The amendments in this update are effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016.

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In April 2016, FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606). ASU 2016-10 reduces the potential for diversity in initial application, as well as the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of Update 2014-09, Revenue from Contracts with Customers (Topic 606).

In May 2016, FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606). ASU 2016-12 provided narrow scope improvements and practical expedients on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements of Update 2014-09, Revenue from Contracts with Customers (Topic 606).

(3) BUSINESS COMBINATIONS
2016 Acquisitions
    
During the first six months of 2016, the Company acquired (i) an oil re-refinery facility located in Nevada from Vertex Energy, Inc. and (ii) a blending and packaging company with operations located in New Orleans and Toronto, Canada. The combined purchase price for the two acquisitions was approximately $59.0 million in cash, subject to customary post-closing adjustments. The acquisitions expand the Company's re-refinery network and blending and packaging capabilities within its Kleen Performance Products segment. The combined amount of revenue from the acquisitions included in the Company's results of operations for each of the three and six months ended June 30, 2016 was approximately $12.1 million, respectively. During the three and six months ended June 30, 2016, the Company incurred acquisition-related costs of approximately $0.4 million and $0.5 million, respectively, in connection with the transactions which are included in selling, general and administrative expenses in the consolidated statements of income. Results of the acquired companies or assets are included within the Kleen Performance Products segment.

The allocation of the purchase price was based on preliminary estimates of the fair value of assets acquired and liabilities assumed as of the acquisition dates. Given the recent timing of these transactions the Company is continuing to obtain information to complete its valuation of these accounts and the associated tax accounting. The components and preliminary allocation of the purchase price consist of the following amounts (in thousands):

 
At Acquisition Dates
 
Measurement Period Adjustments
 
At Acquisition Dates As Reported
June 30, 2016
Accounts receivable
$
9,186

 
$

 
$
9,186

Inventories and supplies
9,431

 

 
9,431

Prepaid and other current assets
433

 

 
433

Property, plant and equipment
45,781

 
(1,477
)
 
44,304

Permits and other intangibles
1,205

 
900

 
2,105

Current liabilities
(7,119
)
 

 
(7,119
)
Deferred taxes, unrecognized tax benefits and other long-term liabilities
(548
)
 

 
(548
)
Total identifiable net assets
58,369

 
(577
)
 
57,792

Goodwill
620

 
577

 
1,197

Total
$
58,989

 
$

 
$
58,989

Pro forma revenue and earnings amounts on a combined basis as if these acquisitions had been completed on January 1, 2015 are immaterial to the consolidated financial statements of the Company since that date.
2015 Acquisitions

Thermo Fluids Inc.

On April 11, 2015, the Company completed the acquisition of Heckmann Environmental Services, Inc. (“HES”) and Thermo Fluids Inc. (“TFI”), a wholly-owned subsidiary of HES. The acquisition was accomplished through a purchase by Safety-Kleen, Inc., a wholly-owned subsidiary of the Company, of all of the issued and outstanding shares of HES from Nuverra Environmental Solutions, Inc. HES is a holding company that does not conduct any operations. TFI provides environmental services, including used oil recycling, used oil filter recycling, antifreeze products, parts washers and solvent recycling, and industrial waste

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management services, including vacuum services, remediation, lab pack and hazardous waste management. The Company acquired TFI for a purchase price of $79.3 million. The acquisition was financed with cash on hand and expands the Company’s environmental services customer base while also complimenting the SK Environmental Services network and presence in the western United States. Results of TFI since acquisition have been included within the SK Environmental Services segment.

The allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of April 11, 2015. The Company believes that such information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed. The Company has finalized the purchase accounting for the acquisition of TFI.

The following table summarizes the recognized amounts of assets acquired and liabilities assumed at April 11, 2015 (in thousands):
 
Preliminary Allocations
 
Measurement Period Adjustments
 
Final Allocations
Accounts receivable
$
7,109

 
$
192

 
$
7,301

Inventories and supplies
1,791

 

 
1,791

Prepaid and other current assets
1,749

 
(1,084
)
 
665

Property, plant and equipment
30,468

 
(2,827
)
 
27,641

Permits and other intangibles
20,000

 
(1,900
)
 
18,100

Current liabilities
(5,859
)
 
(25
)
 
(5,884
)
Closure and post-closure liabilities
(1,676
)
 
(657
)
 
(2,333
)
Deferred taxes, unrecognized tax benefits and other long-term liabilities
(13,081
)
 
3,907

 
(9,174
)
Total identifiable net assets
40,501

 
(2,394
)
 
38,107

Goodwill
36,591

 
4,638

 
41,229

Total
$
77,092

 
$
2,244

 
$
79,336

Pro forma revenue and earnings amounts on a combined basis as if TFI had been acquired on January 1, 2015 are immaterial to the consolidated financial statements of the Company since that date.
Other 2015 Acquisition

In December 2015, the Company acquired certain assets and assumed certain defined liabilities of a privately owned company for approximately $14.7 million in cash. That company specializes in the collection and recycling of used oil filters and was a service provider to the SK Environmental Services segment prior to the acquisition. The acquired assets have been integrated into the SK Environmental Services segment. In connection with this acquisition a preliminary goodwill amount of $7.4 million was recognized.

(4) INVENTORIES AND SUPPLIES
Inventories and supplies consisted of the following (in thousands):
 
June 30, 2016
 
December 31, 2015
Oil and oil products
$
46,671

 
$
33,603

Supplies and drums
78,168

 
78,132

Solvent and solutions
8,756

 
8,868

Modular camp accommodations
15,298

 
15,126

Other
13,511

 
13,792

Total inventories and supplies
$
162,404

 
$
149,521

As of June 30, 2016 and December 31, 2015, other inventories consisted primarily of cleaning fluids, such as absorbents and wipers, and automotive fluids, such as windshield washer fluid and antifreeze.

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(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
 
June 30, 2016
 
December 31, 2015
Land
$
104,533

 
$
100,582

Asset retirement costs (non-landfill)
12,187

 
12,434

Landfill assets
144,540

 
136,624

Buildings and improvements
354,470

 
344,209

Camp equipment
158,394

 
149,361

Vehicles
538,170

 
500,619

Equipment
1,414,946

 
1,328,915

Furniture and fixtures
5,528

 
5,337

Construction in progress
146,199

 
113,657

 
2,878,967

 
2,691,738

Less - accumulated depreciation and amortization
1,283,980

 
1,159,271

Total property, plant and equipment, net
$
1,594,987

 
$
1,532,467

Interest in the amount of $1.3 million and $2.5 million was capitalized to fixed assets during the three and six months ended June 30, 2016, respectively. Interest in the amount of $0.4 million and $0.6 million was capitalized to fixed assets during the three and six months ended June 30, 2015, respectively. Depreciation expense, inclusive of landfill amortization was $63.5 million and $122.8 million for the three and six months ended June 30, 2016, respectively. Depreciation expense, inclusive of landfill amortization was $58.9 million and $116.3 million for the three and six months ended June 30, 2015, respectively.

(6) GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in goodwill for the six months ended June 30, 2016 were as follows (in thousands):
 
 
Technical Services
 
Industrial & Field Services
 
Kleen Performance Products
 
SK Environmental Services
 
Lodging Services
 
Oil and Gas Field Services
 
Totals
Balance at January 1, 2016
 
$
49,267

 
$
105,286

 
$
49,755

 
$
216,589

 
$
32,208

 
$

 
$
453,105

Acquired from acquisitions
 

 

 
1,197

 

 

 

 
1,197

Measurement period adjustment from prior acquisitions
 

 

 

 
2,095

 

 

 
2,095

Foreign currency translation and other
 
(579
)
 
1,319

 
157

 
2,140

 
2,057

 

 
5,094

Balance at June 30, 2016
 
$
48,688

 
$
106,605

 
$
51,109

 
$
220,824

 
$
34,265

 
$

 
$
461,491

The Company assesses goodwill for impairment on an annual basis as of December 31, or at an interim date when events or changes in the business environment would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company conducted the annual impairment test of goodwill for all reporting units as of December 31, 2015 and determined that no adjustment to the carrying value of goodwill for any reporting units was necessary because the fair value of each of the reporting units exceeded that reporting unit's respective carrying value. The Company's next annual impairment assessment will be performed as of December 31, 2016 unless indicators arise that would require the Company to re-evaluate at an earlier date.


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As of June 30, 2016 and December 31, 2015, the Company's finite-lived and indefinite-lived intangible assets consisted of the following (in thousands):
 
June 30, 2016
 
December 31, 2015
 
Cost
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Remaining Amortization
Period
(in years)
 
Cost
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Remaining Amortization
Period
(in years)
Permits
$
162,611

 
$
64,533

 
$
98,078

 
20.7
 
$
161,396

 
$
61,142

 
$
100,254

 
19.0
Customer and supplier relationships
379,236

 
115,500

 
263,736

 
9.5
 
374,866

 
99,463

 
275,403

 
10.1
Other intangible assets
33,984

 
26,517

 
7,467

 
1.2
 
31,416

 
22,581

 
8,835

 
1.5
Total amortizable permits and other intangible assets
575,831

 
206,550

 
369,281

 
9.3
 
567,678

 
183,186

 
384,492

 
10.0
Trademarks and trade names
122,943

 

 
122,943

 
Indefinite
 
122,326

 

 
122,326

 
Indefinite
Total permits and other intangible assets
$
698,774

 
$
206,550

 
$
492,224

 

 
$
690,004

 
$
183,186

 
$
506,818

 

Amortization expense of permits and other intangible assets was $9.9 million and $19.5 million for the three and six months ended June 30, 2016, respectively. Amortization expense of permits and other intangible assets was $8.8 million and $19.8 million for the three and six months ended June 30, 2015, respectively.
The expected amortization of the net carrying amount of finite-lived intangible assets at June 30, 2016 was as follows (in thousands):
Years Ending December 31,
Expected Amortization
2016 (six months)
$
19,941

2017
35,033

2018
31,795

2019
28,897

2020
26,277

Thereafter
227,338

 
$
369,281

(7) ACCRUED EXPENSES
Accrued expenses consisted of the following at June 30, 2016 and December 31, 2015 (in thousands):
 
June 30, 2016
 
December 31, 2015
Insurance
$
57,273

 
$
55,899

Interest
21,587

 
20,500

Accrued compensation and benefits
50,275

 
35,646

Income, real estate, sales and other taxes
39,623

 
37,095

Other
35,055

 
44,520

 
$
203,813

 
$
193,660


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(8) CLOSURE AND POST-CLOSURE LIABILITIES
The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) from January 1, 2016 through June 30, 2016 were as follows (in thousands):
 
Landfill
Retirement
Liability
 
Non-Landfill
Retirement
Liability
 
Total
Balance at January 1, 2016
$
32,023

 
$
24,226

 
$
56,249

Adjustments during the measurement period related to acquisitions

 
657

 
657

New asset retirement obligations
1,263

 

 
1,263

Accretion
1,384

 
1,150

 
2,534

Changes in estimates recorded to statement of operations
(597
)
 
(91
)
 
(688
)
Expenditures
(475
)
 
(570
)
 
(1,045
)
Currency translation and other
152

 
64

 
216

Balance at June 30, 2016
$
33,750

 
$
25,436

 
$
59,186

All of the landfill facilities included in the above were active as of June 30, 2016. There were no significant charges (benefits) in 2016 resulting from changes in estimates for closure and post-closure liabilities.
New asset retirement obligations incurred during the first six months of 2016 were discounted at the credit-adjusted risk-free rate of 6.23%.
(9) REMEDIAL LIABILITIES 
The changes to remedial liabilities for the six months ended June 30, 2016 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, 2016
$
2,327

 
$
63,613

 
$
66,052

 
$
131,992

Accretion
54

 
1,364

 
1,101

 
2,519

Changes in estimates recorded to statement of operations
70

 
(116
)
 
419

 
373

Expenditures
(61
)
 
(2,092
)
 
(3,256
)
 
(5,409
)
Currency translation and other

 
52

 
764

 
816

Balance at June 30, 2016
$
2,390

 
$
62,821

 
$
65,080

 
$
130,291

In the six months ended June 30, 2016 there were no significant charges (benefits) resulting from changes in estimates for remedial liabilities.
(10) FINANCING ARRANGEMENTS 
The following table is a summary of the Company’s financing arrangements (in thousands):
 
June 30, 2016
 
December 31, 2015
Senior unsecured notes, at 5.25%, due August 1, 2020 ("2020 Notes")
$
800,000

 
$
800,000

Senior unsecured notes, at 5.125%, due June 1, 2021 ("2021 Notes")
845,000

 
595,000

Long-term obligations, at par
$
1,645,000

 
$
1,395,000

Unamortized debt issuance costs and premium, net
(13,119
)
 
(12,457
)
Long-term obligations, at carrying value
$
1,631,881

 
$
1,382,543

   
At June 30, 2016 and December 31, 2015, the fair value of the Company's 2020 Notes was $819.0 million and $812.0 million, respectively, based on quoted market prices for the instrument. The fair value of the 2020 Notes is considered a Level 2 measure according to the fair value hierarchy.
On March 14, 2016, the Company issued through a private placement $250.0 million aggregate principal amount as additional notes under the indenture pursuant to which the Company previously issued on December 7, 2012, through a private placement $600.0 million aggregate principal amount of 2021 Notes. Interest payments are paid semi-annually on June 1 and

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December 1 of each year. At June 30, 2016 and December 31, 2015, the fair value of the Company's 2021 Notes was $859.8 million and $599.5 million, respectively, based on quoted market prices for the instrument. The fair value of the 2021 Notes is considered a Level 2 measure according to the fair value hierarchy.
The Company also maintains a revolving credit facility which as of June 30, 2016 and December 31, 2015 had no outstanding loan balances. At June 30, 2016, $190.0 million was available to borrow and outstanding letters of credit were $140.5 million. At December 31, 2015, $178.5 million was available to borrow and outstanding letters of credit were $144.6 million.
The revolving credit facility is guaranteed by all of Clean Harbors, Inc.'s ("Parent's") domestic subsidiaries and secured by substantially all of the Parent’s and its domestic subsidiaries’ assets. Available credit for Parent and its domestic subsidiaries is limited to 85% of their eligible accounts receivable and 100% of their cash deposited in a controlled account with the agent. Available credit for Parent’s Canadian subsidiaries is limited to 85% of their eligible accounts receivable and 100% of their cash deposited in a controlled account with the agent’s Canadian affiliate. The obligations of the Canadian subsidiaries under the revolving credit facility are guaranteed by all of Parent’s Canadian subsidiaries and secured by the accounts receivable of the Canadian subsidiaries, but the Canadian subsidiaries do not guarantee and are not otherwise responsible for the obligations of Parent or its domestic subsidiaries.

(11) EARNINGS (LOSS) PER SHARE     
The following are computations of basic and diluted loss per share (in thousands except for per share amounts):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Numerator for basic and diluted earnings per share:
 

 
 

 
 
 
 
Net income (loss)
$
3,966

 
$
10,395

 
$
(16,905
)
 
$
3,306

 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Basic shares outstanding
57,549

 
58,590

 
57,599

 
58,732

Dilutive effect of equity-based compensation awards
129

 
120

 

 
100

Dilutive shares outstanding
57,678

 
58,710

 
57,599

 
58,832

 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
$
0.07

 
$
0.18

 
$
(0.29
)
 
$
0.06

 
 

 
 

 
 

 
 

Diluted earnings (loss) per share:
$
0.07

 
$
0.18

 
$
(0.29
)
 
$
0.06

For the three months ended June 30, 2016 and 2015, the dilutive effect of all then outstanding options, restricted stock and performance awards is included in the EPS calculations above except for 348,197 and 196,180, respectively, of outstanding performance stock awards for which the performance criteria were not attained at that time and 9,537 and 11,075, respectively, of restricted stock awards which were antidilutive at that time.

As a result of the net loss reported for the six months ended June 30, 2016, all then outstanding stock options, restricted stock awards and performance awards totaling 886,685 were excluded from the calculation of diluted earnings (loss) per share as their inclusion would have an antidilutive effect. 

For the six months ended June 30, 2015, the dilutive effect of all then outstanding options, restricted stock and performance awards is included in the EPS calculations above except for 196,180 of outstanding performance stock awards for which the performance criteria were not attained at that time and 38,171 of restricted stock awards which were antidilutive at that time.


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(12) ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component and related tax effects for the six months ended June 30, 2016 were as follows (in thousands):    
 
Foreign Currency Translation
 
Unfunded Pension Liability
 
Total
Balance at January 1, 2016
$
(252,939
)
 
$
(1,953
)
 
$
(254,892
)
Other comprehensive income before reclassifications
44,659

 

 
44,659

Other comprehensive income
$
44,659

 
$

 
$
44,659

Balance at June 30, 2016
$
(208,280
)
 
$
(1,953
)
 
$
(210,233
)
There were no reclassifications out of accumulated other comprehensive loss during the three and six months ended June 30, 2016 and 2015.

(13) STOCK-BASED COMPENSATION
Total stock-based compensation cost charged to selling, general and administrative expenses for the three and six months ended June 30, 2016 was $2.6 million and $4.7 million, respectively. Total stock-based compensation cost charged to selling, general and administrative expenses for the three and six months ended June 30, 2015 was $4.3 million and $6.1 million, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $0.8 million and $1.4 million for the three and six months ended June 30, 2016, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $0.6 million and $1.1 million for the three and six months ended June 30, 2015, respectively.
Restricted Stock Awards
The following information relates to restricted stock awards that have been granted to employees and directors under the Company's equity incentive plans (the "Plans"). The restricted stock awards are not transferable until vested and the restrictions generally lapse upon the achievement of continued employment over a three-to-five-year period or service as a director until the following annual meeting of shareholders. The fair value of each restricted stock grant is based on the closing price of the Company's common stock on the date of grant and is amortized to expense over its vesting period.
    
The following table summarizes information about restricted stock awards for the six months ended June 30, 2016:
Restricted Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2016
362,618

 
$
55.79

Granted
299,967

 
$
51.02

Vested
(128,895
)
 
$
55.18

Forfeited
(16,785
)
 
$
57.22

Balance at June 30, 2016
516,905

 
$
53.12

    
As of June 30, 2016, there was $23.2 million of total unrecognized compensation cost arising from restricted stock awards under the Company's Plans. This cost is expected to be recognized over a weighted average period of 3.1 years. The total fair value of restricted stock vested during the three and six months ended June 30, 2016 was $2.3 million and $6.1 million, respectively. The total fair value of restricted stock vested during the three and six months ended June 30, 2015 was $3.0 million and $6.2 million, respectively.
    
Performance Stock Awards

The following information relates to performance stock awards that have been granted to employees under the Company's Plans. Performance stock awards are subject to performance criteria established by the compensation committee of the Company's board of directors prior to or at the date of grant. The vesting of the performance stock awards is based on achieving such targets typically based on revenue, Adjusted EBITDA margin, return on invested capital percentage and Total Recordable Incident Rate. In addition, performance stock awards include continued service conditions. The fair value of each performance stock award is based on

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the closing price of the Company's common stock on the date of grant and is amortized to expense over the service period if achievement of performance measures is considered probable.

The following table summarizes information about performance stock awards for the six months ended June 30, 2016:
Performance Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2016
187,274

 
$
57.13

Granted
204,602

 
$
54.30

Vested
(8,420
)
 
$
61.90

Forfeited
(13,676
)
 
$
57.23

Balance at June 30, 2016
369,780

 
$
55.45


As of June 30, 2016, there was $0.6 million of total unrecognized compensation cost arising from unvested performance stock awards deemed probable of vesting under the Company's Plans. No performance awards vested during the three months ended June 30, 2016. The total fair value of performance awards vested during the six months ended June 30, 2016 was $0.4 million. The total fair value of performance awards vested during the six months ended June 30, 2015 was $0.3 million. No performance awards vested during the three months ended June 30, 2015.

Common Stock Repurchases
On March 13, 2015, the Company's board of directors authorized the repurchase of up to $300 million of the Company's common stock. During the three and six months ended June 30, 2016, the Company repurchased and retired a total of 0.1 million shares and 0.2 million shares, respectively, of the Company's common stock for a total cost of $5.1 million and $10.1 million, respectively. During the three and six months ended June 30, 2015, the Company repurchased and retired a total of 0.3 million shares and 0.6 million shares, respectively, of the Company's common stock for a total cost of $16.1 million and $32.2 million, respectively. Through June 30, 2016, the Company has repurchased and retired a total of 3.6 million shares of the Company's common stock for a total cost of $187.8 million under this program. As of June 30, 2016, an additional $112.2 million remains available for repurchase of shares under the current authorized program.
(14) COMMITMENTS AND CONTINGENCIES
Legal and Administrative Proceedings
The Company and its subsidiaries are subject to legal proceedings and claims arising in the ordinary course of business. Actions filed against the Company arise from commercial and employment-related claims including alleged class actions related to sales practices and wage and hour claims. The plaintiffs in these actions may be seeking damages or injunctive relief or both. These actions are in various jurisdictions and stages of proceedings, and some are covered in part by insurance. In addition, the Company’s waste management services operations are regulated by federal, state, provincial and local laws enacted to regulate discharge of materials into the environment, remediation of contaminated soil and groundwater or otherwise protect the environment. This ongoing regulation results in the Company frequently becoming a party to legal or administrative proceedings involving all levels of governmental authorities and other interested parties. The issues involved in such proceedings generally relate to alleged violations of existing permits and licenses or alleged responsibility under federal or state Superfund laws to remediate contamination at properties owned either by the Company or by other parties (“third party sites”) to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes.
At June 30, 2016 and December 31, 2015, the Company had recorded reserves of $21.1 million and $21.9 million, respectively, in the Company's financial statements for actual or probable liabilities related to the legal and administrative proceedings in which the Company was then involved, the principal of which are described below. At June 30, 2016 and December 31, 2015, the Company also believed that it was reasonably possible that the amount of these potential liabilities could be as much as $1.8 million and $1.9 million more, respectively. The Company periodically adjusts the aggregate amount of these reserves when actual or probable liabilities are paid or otherwise discharged, new claims arise, or additional relevant information about existing or probable claims becomes available. As of June 30, 2016 and December 31, 2015, the $21.1 million and $21.9 million, respectively, of reserves consisted of (i) $18.7 million and $18.9 million, respectively, related to pending legal or administrative proceedings, including Superfund liabilities, which were included in remedial liabilities on the consolidated balance sheets, and (ii) $2.4 million and $3.0 million, respectively, primarily related to federal, state and provincial enforcement actions, which were included in accrued expenses on the consolidated balance sheets.

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As of June 30, 2016, the principal legal and administrative proceedings in which the Company was involved, or which had been terminated during 2016, 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. In 1999, Ville Mercier and three neighboring municipalities filed separate legal proceedings against the Mercier Subsidiary and the Government of Quebec. In 2012, the municipalities amended their existing statement of claim to seek $2.9 million (Cdn) in general damages and $10.0 million (Cdn) in punitive damages, plus interest and costs, as well as injunctive relief. Both the Government of Quebec and the Company have filed summary judgment motions against the municipalities. The parties are currently attempting to negotiate a resolution and hearings on the motions have been delayed. In September 2007, the Quebec Minister of Sustainable Development, Environment and Parks issued a Notice pursuant to Section 115.1 of the Environment Quality Act, superseding Notices issued in 1992, which are the subject of the pending litigation. The more recent Notice notifies the Mercier Subsidiary that, if the Mercier Subsidiary does not take certain remedial measures at the site, the Minister intends to undertake those measures at the site and claim direct and indirect costs related to such measures. The Company has accrued for costs expected to be incurred relative to the resolution of this matter and believes this matter will not have a future material effect on its financial position or results of operations.
Safety-Kleen Legal Proceedings. On December 28, 2012, the Company acquired Safety-Kleen, Inc. ("Safety-Kleen") and thereby became subject to the legal proceedings in which Safety-Kleen was a party on that date. In addition to certain Superfund proceedings in which Safety-Kleen has been named as a potentially responsible party as described below under “Superfund Proceedings,” the principal such legal proceedings involving Safety-Kleen which were outstanding as of June 30, 2016 were as follows:
Product Liability Cases. Safety-Kleen has been named as a defendant in various lawsuits that are currently pending in various courts and jurisdictions throughout the United States, including approximately 62 proceedings (excluding cases which have been settled but not formally dismissed) as of June 30, 2016, 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 an historic failure to warn that solvent contains trace amounts of toxic or hazardous substances such as benzene.
Safety-Kleen maintains insurance that it believes will provide coverage for these product liability claims (over amounts accrued for self-insured retentions and deductibles in certain limited cases), except for punitive damages to the extent not insurable under state law or excluded from insurance coverage. Safety-Kleen also believes that these claims lack merit and has historically vigorously defended, and intends to continue to vigorously defend, itself and the safety of its products against all 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 June 30, 2016. From January 1, 2016 to June 30, 2016, 14 product liability claims were settled or dismissed. Due to the nature of these claims and the related insurance, the Company did not incur any expense as Safety-Kleen's insurance provided coverage in full for all such claims. Safety-Kleen may be named in similar, additional lawsuits in the future, including claims for which insurance coverage may not be available.    
Superfund Proceedings
The Company has been notified that either the Company (which, since December 28, 2012, includes Safety-Kleen) or the prior owners of certain of the Company's facilities for which the Company may have certain indemnification obligations have been identified as potentially responsible parties ("PRPs") or potential PRPs in connection with 129 sites which are subject to or are proposed to become subject to proceedings under federal or state Superfund laws. Of the 129 sites, two (the Wichita Facility and the BR Facility described below) involve facilities that are now owned by the Company and 127 involve third party sites to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes. Of the 127 third party sites, 32 are now settled, 15 are currently requiring expenditures on remediation and 80 are not currently requiring expenditures on remediation.
In connection with each site, the Company has estimated the extent, if any, to which it may be subject, either directly or as a result of any indemnification obligations, for cleanup and remediation costs, related legal and consulting costs associated with PRP investigations, settlements, and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability (if any) of the Company

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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. In addition to the Wichita Property and the BR Facility described below, Clean Harbors believes its potential liability could exceed $100,000 at 11 of the 127 third party sites.
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 U.S. Environmental Protection Agency (the "EPA"), and the Company is continuing an 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. The Company filed suit against the earlier owner in July of 2015 to recover costs incurred during the cleanup of the property.
BR Facility.    The Company acquired in 2002 a former hazardous waste incinerator and landfill in Baton Rouge (the "BR Facility"), for which operations had been previously discontinued by the prior owner. In September 2007, the 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, 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.
Third Party Sites.    Of the 127 third party sites at which the Company has been notified it is a PRP or potential PRP or may have indemnification obligations, Clean Harbors has an indemnification agreement at 11 of these sites with ChemWaste, a former subsidiary of Waste Management, Inc., and at six additional of these third party sites, Safety-Kleen has a similar indemnification agreement with McKesson Corporation. These agreements indemnify the Company (which now includes Safety-Kleen) with respect to any liability at the 17 sites for waste disposed prior to the Company's (or Safety-Kleen's) acquisition of the former subsidiaries of Waste Management or McKesson which had shipped wastes to those sites. Accordingly, Waste Management or McKesson are paying all costs of defending those subsidiaries in those 17 cases, including legal fees and settlement costs. However, there can be no guarantee that the Company's ultimate liabilities for those sites will not exceed the amount recorded or that indemnities applicable to any of these sites will be available to pay all or a portion of related costs. Except for the indemnification agreements which the Company holds from ChemWaste and McKesson, the Company does not have an indemnity agreement with respect to any of the 127 third party sites discussed above.
Federal, State and Provincial Enforcement Actions
From time to time, the Company pays fines or penalties in regulatory proceedings relating primarily to waste treatment, storage or disposal facilities. As of June 30, 2016 and December 31, 2015, there were four and six proceedings, respectively, 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.
(15) INCOME TAXES 
The Company records a tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. Losses from jurisdictions for which no benefit can be recognized and the income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. The estimated annual effective tax rate may be significantly impacted by projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.
The Company's effective tax rate for the three and six months ended June 30, 2016 was 68.7% and (57.3)% compared to 74.6% and 88.6% for the same periods in 2015. The variations in the effective income tax rates for the three and six months ended

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June 30, 2016 as compared to more customary relationships between pre-tax income and the provision for income taxes was primarily due to not recognizing income tax benefits from current operating losses related to certain Canadian entities. Such variations in the three and six month periods ended June 30, 2015 were due to the lack of any tax benefit associated with the goodwill impairment charge recorded in the second quarter of 2015.
As of June 30, 2016 and December 31, 2015, the Company had recorded $2.1 million of liabilities for unrecognized tax benefits and $0.4 million of interest, respectively.
Due to expiring statute of limitation periods, the Company believes that total unrecognized tax benefits will decrease by approximately $0.5 million within the next 12 months. This is the result of a pre-acquisition audit settlement for one of the Company's foreign entities.
(16) SEGMENT REPORTING 
Segment reporting is prepared on the same basis that the Company's chief executive officer, who is the Company's chief operating decision maker, manages the business, makes operating decisions and assesses performance. As of June 30, 2016, the Company's operations were managed in six reportable segments based primarily upon the nature of the various operations and services provided: Technical Services, Industrial and Field Services which consists of the Industrial Services and Field Services operating segments, Kleen Performance Products, SK Environmental Services, Lodging Services and Oil and Gas Field Services.

Third party revenue is revenue billed to outside customers by a particular segment. Direct revenue is revenue allocated to the segment providing the product or service. Intersegment revenues represent the sharing of third party revenues among the segments based on products and services provided by each segment as if the products and services were sold directly to the third party. The intersegment revenues are shown net. The negative intersegment revenues are due to more transfers out of customer revenues to other segments than transfers in of customer revenues from other segments. The operations not managed through the Company’s six reportable segments are recorded as “Corporate Items.” Corporate Items revenues consist of certain operations for which the revenues are insignificant and not allocated to the segments for internal reporting purposes. Corporate Items cost of revenues represents certain central services that are not allocated to the six 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 six reportable segments. Performance of the segments is evaluated on several factors, of which the primary financial measure is “Adjusted EBITDA,” which consists of net income (loss) plus accretion of environmental liabilities, depreciation and amortization, net interest expense, provision for income taxes, other non-cash charges not deemed representative of fundamental segment results and excludes other expense. Transactions between the segments are accounted for at the Company’s best estimate based on similar transactions with outside customers. 
The following table reconciles third party revenues to direct revenues for the three and six months ended June 30, 2016 and 2015 (in thousands):
 
For the Three Months Ended June 30, 2016
 
For the Three Months Ended June 30, 2015
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
Technical Services
$
229,130

 
$
35,578

 
$
667

 
$
265,375

 
$
248,025

 
$
38,314

 
$
1,083

 
$
287,422

Industrial and Field Services
153,851

 
(9,055
)
 
(286
)
 
144,510

 
353,329

 
(11,230
)
 
(401
)
 
341,698

Kleen Performance Products
86,711

 
(7,600
)
 

 
79,111

 
99,104

 
(21,428
)
 
(1
)
 
77,675

SK Environmental Services
191,004

 
(21,492
)
 
1

 
169,513

 
175,876

 
(8,802
)
 
3

 
167,077

Lodging Services
16,418

 
137

 
14

 
16,569

 
21,171

 
992

 
80

 
22,243

Oil and Gas Field Services
19,232

 
2,432

 
48

 
21,712

 
38,617

 
2,154

 
40

 
40,811

Corporate Items
1,164

 

 
(444
)
 
720

 
106

 

 
(804
)
 
(698
)
Total
$
697,510

 
$

 
$

 
$
697,510

 
$
936,228

 
$

 
$

 
$
936,228


17

Table of Contents

 
For the Six Months Ended June 30, 2016
 
For the Six Months Ended June 30, 2015
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
Technical Services
$
448,235

 
$
70,422

 
$
1,055

 
$
519,712

 
$
488,350

 
$
73,218

 
$
2,380

 
$
563,948

Industrial and Field Services
275,428

 
(16,521
)
 
(303
)
 
258,604

 
500,197

 
(17,791
)
 
(323
)
 
482,083

Kleen Performance Products
154,254

 
(17,007
)
 
(1
)
 
137,246

 
195,911

 
(39,685
)
 
(2
)
 
156,224

SK Environmental Services
370,422

 
(40,606
)
 
368

 
330,184

 
336,560

 
(20,384
)
 
3

 
316,179

Lodging Services
32,063

 
401

 
35

 
32,499

 
55,275

 
1,156

 
97

 
56,528

Oil and Gas Field Services
51,248

 
3,311

 
135

 
54,694

 
92,204

 
3,486

 
49

 
95,739

Corporate Items
1,943

 

 
(1,289
)
 
654

 
230

 

 
(2,204
)
 
(1,974
)
Total
$
1,333,593

 
$

 
$

 
$
1,333,593

 
$
1,668,727

 
$

 
$

 
$
1,668,727

The following table presents Adjusted EBITDA information used by management by reported segment (in thousands). The Company does not allocate interest expense, income taxes, depreciation, amortization, accretion of environmental liabilities, other non-cash charges not deemed representative of fundamental segment results, and other expense (income) to its segments.    
 
For the Three Months Ended
 
For the Six Months Ended
 
June 30,
 
June 30,
 
2016
 
2015
 
2016
 
2015
Adjusted EBITDA:
 

 
 

 
 
 
 
Technical Services
$
68,891

 
$
76,808

 
$
129,289

 
$
140,209

Industrial and Field Services
19,946

 
73,081

 
22,064

 
83,390

Kleen Performance Products
9,995

 
15,824

 
14,555

 
11,348

SK Environmental Services
45,239

 
41,195

 
80,734

 
68,444

Lodging Services
3,022

 
3,852

 
4,041

 
10,762

Oil and Gas Field Services
(4,207
)
 
(2,182
)
 
(5,601
)
 
(779
)
Corporate Items
(32,441
)
 
(45,456
)
 
(67,317
)
 
(71,975
)
Total
$
110,445

 
$
163,122

 
$
177,765

 
$
241,399

Reconciliation to Consolidated Statements of Operations:
 

 
 

 
 
 
 
Accretion of environmental liabilities
2,548

 
2,599

 
5,053

 
5,218

Depreciation and amortization
73,393

 
67,773

 
142,295

 
136,129

Goodwill impairment charge

 
31,992

 

 
31,992

Income from operations
34,504

 
60,758

 
30,417

 
68,060

Other expense
189

 
660

 
539

 
251

Interest expense, net of interest income
21,647

 
19,249

 
40,627

 
38,687

Income (loss) before provision for income taxes
$
12,668

 
$
40,849

 
$
(10,749
)
 
$
29,122


18

Table of Contents

The following table presents certain assets by reportable segment and in the aggregate (in thousands):
 
June 30, 2016
 
Technical
Services
 
Industrial and Field
Services
 
Kleen Performance Products
 
SK Environmental Services
 
Lodging Services
 
Oil and Gas Field
Services
 
Corporate
Items
 
Totals
Property, plant and equipment, net
$
507,996

 
$
231,334

 
$
211,082

 
$
302,260

 
$
104,386

 
$
146,423

 
$
91,506

 
$
1,594,987

Goodwill
48,688

 
106,605

 
51,109

 
220,824

 
34,265

 

 

 
461,491

Permits and other intangibles, net
69,683

 
13,587

 
139,867

 
251,087

 
6,495

 
11,505

 

 
492,224

Total assets
$
823,881

 
$
375,796

 
$
520,943

 
$
852,082

 
$
181,031

 
$
235,775

 
$
702,873

 
$
3,692,381

 
December 31, 2015
 
Technical
Services
 
Industrial and Field
Services
 
Kleen Performance Products
 
SK Environmental Services
 
Lodging Services
 
Oil and Gas Field
Services
 
Corporate
Items
 
Totals
Property, plant and equipment, net
$
483,425

 
$
237,660

 
$
193,855

 
$
264,539

 
$
105,208

 
$
156,286

 
$
91,494

 
$
1,532,467

Goodwill
49,267

 
105,286

 
49,755

 
216,589

 
32,208

 

 

 
453,105

Permits and other intangibles, net
73,601

 
14,649

 
140,410

 
256,251

 
7,045

 
14,862

 

 
506,818

Total assets
$
800,060

 
$
368,858

 
$
492,483

 
$
805,488

 
$
181,357

 
$
244,210

 
$
538,972

 
$
3,431,428

The following table presents total assets by geographical area (in thousands):
 
June 30, 2016
 
December 31, 2015
United States
$
2,837,201

 
$
2,575,746

Canada
850,355

 
851,949

Other foreign
4,825

 
3,733

Total
$
3,692,381

 
$
3,431,428

(17) GUARANTOR AND NON-GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION
The 2020 Notes and the 2021 Notes are guaranteed by substantially all of the Company's subsidiaries organized in the United States (the "U.S. Guarantor Subsidiaries"). Each U.S. Guarantor Subsidiary is a 100% owned subsidiary of Clean Harbors, Inc. ("Parent") and its guarantee is both full and unconditional and joint and several.  The guarantees, are however, subject to customary release provisions under which, in particular, the guarantee of any U.S. Guarantor Subsidiary will be released if we sell such subsidiary to an unrelated third party in accordance with the terms of the indenture which governs the notes. The 2020 Notes and the 2021 Notes are not guaranteed by Parent's Canadian or other foreign subsidiaries (the "Foreign Non-Guarantor Subsidiaries"). The following presents supplemental condensed consolidating financial information for Parent, the U.S. Guarantor Subsidiaries and the Foreign Non-Guarantor Subsidiaries, respectively.
As discussed further in Note 10, “Financing Arrangements,” to our consolidated financial statements included herein, on March 14, 2016, Parent issued through a private placement, $250.0 million aggregate principal amount as additional notes under the 2021 Notes. In connection with this offering the proceeds were then transferred to the US Guarantor Subsidiaries and are reflected as an investment of Parent in the U.S. Guarantor Subsidiaries for the period ending June 30, 2016.






19

Table of Contents

Following is the condensed consolidating balance sheet at June 30, 2016 (in thousands):
 
Clean
Harbors, Inc.
 
U.S. Guarantor
Subsidiaries
 
Foreign
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
51,291

 
$
224,493

 
$
77,139

 
$

 
$
352,923

Intercompany receivables
181,741

 
302,354

 
30,741

 
(514,836
)
 

Accounts receivable, net

 
407,601

 
96,148

 

 
503,749

Other current assets
378

 
198,612

 
63,472

 

 
262,462

Property, plant and equipment, net

 
1,138,285

 
456,702

 

 
1,594,987

Investments in subsidiaries
2,833,394

 
514,708

 

 
(3,348,102
)
 

Intercompany debt receivable

 
277,623

 
3,701

 
(281,324
)
 

Goodwill

 
369,978

 
91,513

 

 
461,491

Permits and other intangibles, net

 
423,932

 
68,292

 

 
492,224

Other long-term assets
1,412

 
9,559

 
13,574

 

 
24,545

Total assets
$
3,068,216

 
$
3,867,145

 
$
901,282

 
$
(4,144,262
)
 
$
3,692,381

Liabilities and Stockholders’ Equity:
 

 
 

 
 

 
 

 
 

Current liabilities
$
21,852

 
$
427,367

 
$
71,202

 
$

 
$
520,421

Intercompany payables
294,439

 
217,430

 
2,967

 
(514,836
)
 

Closure, post-closure and remedial liabilities, net

 
150,182

 
15,252

 

 
165,434

Long-term obligations
1,631,881

 

 

 

 
1,631,881

Intercompany debt payable
3,701

 

 
277,623

 
(281,324
)
 

Other long-term liabilities

 
238,772

 
19,530

 

 
258,302

Total liabilities
1,951,873

 
1,033,751

 
386,574

 
(796,160
)
 
2,576,038

Stockholders’ equity
1,116,343

 
2,833,394

 
514,708

 
(3,348,102
)
 
1,116,343

Total liabilities and stockholders’ equity
$
3,068,216

 
$
3,867,145

 
$
901,282

 
$
(4,144,262
)
 
$
3,692,381



20

Table of Contents

Following is the condensed consolidating balance sheet at December 31, 2015 (in thousands):
 
Clean
Harbors, Inc.
 
U.S. Guarantor
Subsidiaries
 
Foreign
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
11,017

 
$
83,479

 
$
90,212

 
$

 
$
184,708

Intercompany receivables
164,709

 
213,243

 
39,804

 
(417,756
)
 

Accounts receivables, net

 
404,580

 
91,424

 

 
496,004

Other current assets

 
179,969

 
60,515

 

 
240,484

Property, plant and equipment, net