Document
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 September 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
 
57,392,673
(Class)
 
(Outstanding as of October 31, 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)

 
September 30, 2016
 
December 31, 2015
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
257,857

 
$
184,708

Accounts receivable, net of allowances aggregating $28,782 and $31,426, respectively
512,376

 
496,004

Unbilled accounts receivable
41,542

 
25,940

Deferred costs
19,970

 
18,758

Inventories and supplies
177,288

 
149,521

Prepaid expenses and other current assets
40,898

 
46,265

Total current assets
1,049,931

 
921,196

Property, plant and equipment, net
1,648,571

 
1,532,467

Other assets:
 
 
 
Deferred financing costs
1,197

 
1,847

Goodwill
470,633

 
453,105

Permits and other intangibles, net
507,337

 
506,818

Other
34,944

 
15,995

Total other assets
1,014,111

 
977,765

Total assets
$
3,712,613

 
$
3,431,428

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
226,776

 
$
241,183

Deferred revenue
66,023

 
61,882

Accrued expenses
226,080

 
193,660

Current portion of closure, post-closure and remedial liabilities
20,217

 
20,395

Total current liabilities
539,096

 
517,120

Other liabilities:
 
 
 
Closure and post-closure liabilities, less current portion of $6,057 and $7,229, respectively
56,510

 
49,020

Remedial liabilities, less current portion of $14,160 and $13,166, respectively
114,921

 
118,826

Long-term obligations
1,632,577

 
1,382,543

Deferred taxes, unrecognized tax benefits and other long-term liabilities
268,564

 
267,637

Total other liabilities
2,072,572

 
1,818,026

Commitments and contingent liabilities (See Note 15)


 


Stockholders’ equity:
 
 
 
Common stock, $.01 par value:
 
 
 
Authorized 80,000,000; shares issued and outstanding 57,389,531 and 57,593,201
shares, respectively
574

 
576

Shares held under employee participation plan
(469
)
 
(469
)
Additional paid-in capital
726,878

 
738,401

Accumulated other comprehensive loss
(211,544
)
 
(254,892
)
Accumulated earnings
585,506

 
612,666

Total stockholders’ equity
1,100,945

 
1,096,282

Total liabilities and stockholders’ equity
$
3,712,613

 
$
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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
Service revenues
$
594,225

 
$
760,667

 
$
1,709,018

 
$
2,158,344

Product revenues
135,295

 
132,699

 
354,095

 
403,749

Total revenues
729,520

 
893,366

 
2,063,113

 
2,562,093

Cost of revenues (exclusive of items shown separately below)
 
 
 
 
 
 
 
Service revenues
385,542

 
523,676

 
1,148,212

 
1,484,936

Product revenues
106,373

 
110,970

 
287,984

 
348,905

Total cost of revenues
491,915

 
634,646

 
1,436,196

 
1,833,841

Selling, general and administrative expenses
110,954

 
93,113

 
322,501

 
321,246

Accretion of environmental liabilities
2,476

 
2,577

 
7,529

 
7,795

Depreciation and amortization
73,360

 
69,060

 
215,655

 
205,189

Goodwill impairment charge
34,013

 

 
34,013

 
31,992

Income from operations
16,802

 
93,970

 
47,219

 
162,030

Other expense
(198
)
 
(139
)
 
(737
)
 
(390
)
Gain on sale of business
16,431

 

 
16,431

 

Interest expense, net of interest income of $196, $126, $571 and $465, respectively
(21,565
)
 
(19,017
)
 
(62,192
)
 
(57,704
)
Income before provision for income taxes
11,470

 
74,814

 
721

 
103,936

Provision for income taxes
21,725

 
34,586

 
27,881

 
60,402

Net (loss) income
$
(10,255
)
 
$
40,228

 
$
(27,160
)
 
$
43,534

(Loss) earnings per share:
 
 
 
 
 
 
 
Basic
$
(0.18
)
 
$
0.69

 
$
(0.47
)
 
$
0.74

Diluted
$
(0.18
)
 
$
0.69

 
$
(0.47
)
 
$
0.74

Shares used to compute (loss) earnings per share - Basic
57,487

 
58,161

 
57,575

 
58,799

Shares used to compute (loss) earnings per share - Diluted
57,487

 
58,268

 
57,575

 
58,898


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 (LOSS) INCOME

(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Net (loss) income
$
(10,255
)
 
$
40,228

 
$
(27,160
)
 
$
43,534

Other comprehensive (loss) income:
 
 
 
 
 
 
 
Unrealized losses on available-for-sale securities (net of taxes of $238, $0, $238 and $0, respectively)
(164
)
 

 
(358
)
 

Foreign currency translation adjustments
(1,147
)
 
(53,541
)
 
43,706

 
(118,713
)
Other comprehensive (loss) income
(1,311
)
 
(53,541
)
 
43,348

 
(118,713
)
Comprehensive (loss) income
$
(11,566
)
 
$
(13,313
)
 
$
16,188

 
$
(75,179
)

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


3

Table of Contents

CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
 
Nine Months Ended
 
September 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(27,160
)
 
$
43,534

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
215,655

 
205,189

Goodwill impairment charge
34,013

 
31,992

Allowance for doubtful accounts
6,203

 
5,631

Amortization of deferred financing costs and debt discount
2,685

 
2,459

Accretion of environmental liabilities
7,529

 
7,795

Changes in environmental liability estimates
(349
)
 
(2,200
)
Deferred income taxes
(28,826
)
 
(18,994
)
Stock-based compensation
7,735

 
6,550

Excess tax benefit of stock-based compensation
(21
)
 
(102
)
Net tax deficiency on stock based awards
(642
)
 
(78
)
Other expense
1,247

 
390

Gain on sale of business
(16,431
)
 

Environmental expenditures
(9,374
)
 
(16,773
)
Changes in assets and liabilities, net of acquisitions
 
 
 
Accounts receivable and unbilled accounts receivable
(32,944
)
 
(63,222
)
Inventories and supplies
(13,722
)
 
14,708

Other current assets
5,619

 
18,706

Accounts payable
(11,951
)
 
47,051

Other current and long-term liabilities
39,561

 
26,957

Net cash from operating activities
178,827

 
309,593

Cash flows used in investing activities:
 
 
 
Additions to property, plant and equipment
(175,348
)
 
(189,999
)
Proceeds from sales of fixed assets
3,982

 
3,740

Acquisitions, net of cash acquired
(207,089
)
 
(79,610
)
Proceeds on sale of business, net of cash
47,134

 

Additions to intangible assets, including costs to obtain or renew permits
(1,920
)
 
(4,633
)
Purchases of available-for-sale securities
(598
)
 

Net cash used in investing activities
(333,839
)
 
(270,502
)
Cash flows from (used in) financing activities:
 
 
 
Change in uncashed checks
(7,084
)
 
(21,882
)
Proceeds from exercise of stock options
230

 
397

Issuance of restricted shares, net of shares remitted
(2,500
)
 
(2,027
)
Repurchases of common stock
(15,869
)
 
(69,155
)
Deferred financing costs paid
(2,614
)
 

Payments on capital leases

 
(500
)
Excess tax benefit of stock-based compensation
21

 
102

Issuance of senior secured notes, including premium
250,625

 

Net cash from (used in) financing activities
222,809

 
(93,065
)
Effect of exchange rate change on cash
5,352

 
(13,714
)
Increase (decrease) in cash and cash equivalents
73,149

 
(67,688
)
Cash and cash equivalents, beginning of period
184,708

 
246,879

Cash and cash equivalents, end of period
$
257,857

 
$
179,191

Supplemental information:
 
 
 
Cash payments for interest and income taxes:
 
 
 
Interest paid
$
66,261

 
$
58,613

Income taxes paid
27,196

 
32,276

Non-cash investing and financing activities:
 
 
 
Accrual for repurchased shares
479

 
658

Property, plant and equipment accrued
18,181

 
29,549

Receivable for estimated purchase price adjustment
1,910

 
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

 

 

 

 

 
(27,160
)
 
(27,160
)
Other comprehensive income

 

 

 

 
43,348

 

 
43,348

Stock-based compensation

 

 

 
7,735

 

 

 
7,735

Issuance of restricted shares, net of shares remitted
124

 
1

 

 
(2,501
)
 

 

 
(2,500
)
Repurchases of common stock
(337
)
 
(3
)
 

 
(16,345
)
 

 

 
(16,348
)
Exercise of stock options
10

 

 

 
230

 

 

 
230

Net tax deficiency on stock based awards

 

 

 
(642
)
 

 

 
(642
)
Balance at September 30, 2016
57,390

 
$
574

 
$
(469
)
 
$
726,878

 
$
(211,544
)
 
$
585,506

 
$
1,100,945



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


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Table of Contents

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 is 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 a material 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).
    
In August 2016, FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The amendment provides updated guidance on eight specific cash flow issues, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from settlement of insurance claims and corporate-owned life insurance, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. 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, 2017.

(3) BUSINESS COMBINATIONS
2016 Acquisitions
    
During the first nine months of 2016, the Company acquired seven businesses that will primarily complement the strategy to create a direct sales model as it relates to the sale of the Company's oil products. These acquisitions provided the Company two additional oil re-refineries while also expanding its used motor oil collection network and providing greater blending and packaging capabilities. These acquisitions provide the Company with greater access to customers in the West Coast region of the United States and additional locations with Part B permits. Operations of these acquisitions are primarily being integrated across the SK Environmental Services and Kleen Performance Products segments with certain operations also being integrated into the Technical Services and Industrial and Field Services segments.

The combined purchase price for the seven acquisitions was approximately $205.2 million paid in cash and subject to customary post-closing adjustments. The combined amount of direct revenue from the acquisitions included in the Company's results of operations for each of the three and nine months ended September 30, 2016 was approximately $26.0 million and $38.1 million, respectively. During the three and nine months ended September 30, 2016, the Company incurred acquisition-related costs of approximately $0.7 million and $1.2 million, respectively, in connection with the transactions which are included in selling, general and administrative expenses in the consolidated statements of operations.
 

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    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
September 30, 2016
Accounts receivable
$
17,384

 
$
(1,016
)
 
$
16,368

Inventories and supplies
13,859

 
(1,071
)
 
12,788

Prepaid expenses and other current assets
920

 
9

 
929

Property, plant and equipment
132,705

 
(1,843
)
 
130,862

Permits and other intangibles
23,405

 
3,651

 
27,056

Deferred tax assets
855

 
(2
)
 
853

Current liabilities
(19,486
)
 
(438
)
 
(19,924
)
Closure and post-closure liabilities

(1,709
)
 
(699
)
 
(2,408
)
Deferred taxes, unrecognized tax benefits and other long-term liabilities
(9,518
)
 
(1,894
)
 
(11,412
)
Total identifiable net assets
158,415

 
(3,303
)
 
155,112

Goodwill
48,674

 
1,393

 
50,067

Total purchase price, net of cash acquired
$
207,089

 
$
(1,910
)
 
$
205,179

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 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 finalized the purchase accounting for the acquisition of TFI in the second quarter of 2016.


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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 purchase price, net of cash acquired
$
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) DISPOSITION OF BUSINESS
On September 1, 2016, the Company completed the sale of its Catalyst Services business, which was a non-core business previously included within the Industrial and Field Services segment, for approximately $50.1 million ($48.6 million net of cash divested) subject to customary post-closing conditions. As a result of the sale, the Company recognized during the three and nine months ended September 30, 2016 a pre-tax gain of $16.4 million which is included in gain on sale of business in the Company’s consolidated statement of operations. Inclusive within this gain was $1.5 million of transactional related costs.

The following table presents the carrying amounts of the Company's Catalyst Services business immediately preceding the disposition on September 1, 2016, in thousands:
 
September 1, 2016
Total current assets
$
19,135

Property, plant and equipment, net
11,126

Total other assets
6,500

Total assets divested
$
36,761

Total current liabilities
4,040

Total other liabilities
566

Total liabilities divested
$
4,606

Net carrying value divested
$
32,155



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The Company evaluated the disposition and determined it did not meet the “major effect” criteria for classification as a discontinued operation largely due to the nature and size of the operations of the disposed of entity. However, the Company determined that the disposition does represent an individually significant component of the Company's business. The following table presents (loss) income attributable to the Catalyst Services business included in the Company's consolidated results of operations for each of the periods shown and through its disposition on September 30, 2016, in thousands:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
(Loss) income before provision for income taxes
(1,218
)
 
1,089

 
290

 
2,489


(5) INVENTORIES AND SUPPLIES
Inventories and supplies consisted of the following (in thousands):
 
September 30, 2016
 
December 31, 2015
Oil and oil products
$
57,403

 
$
33,603

Supplies and drums
84,133

 
78,132

Solvent and solutions
8,502

 
8,868

Modular camp accommodations
15,492

 
15,126

Other
11,758

 
13,792

Total inventories and supplies
$
177,288

 
$
149,521

The increase in oil and oil products as of September 30, 2016 as compared to December 31, 2015 was a result of the Company's recent acquisitions and implementation of its closed loop direct sales model. As of September 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.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
 
September 30, 2016
 
December 31, 2015
Land
$
122,337

 
$
100,582

Asset retirement costs (non-landfill)
14,590

 
12,434

Landfill assets
142,587

 
136,624

Buildings and improvements
379,435

 
344,209

Camp equipment
156,838

 
149,361

Vehicles
535,804

 
500,619

Equipment
1,465,378

 
1,328,915

Furniture and fixtures
5,546

 
5,337

Construction in progress
147,569

 
113,657

 
2,970,084

 
2,691,738

Less - accumulated depreciation and amortization
1,321,513

 
1,159,271

Total property, plant and equipment, net
$
1,648,571

 
$
1,532,467

Interest in the amount of $1.5 million and $4.0 million was capitalized to fixed assets during the three and nine months ended September 30, 2016, respectively. Interest in the amount of $0.6 million and $1.2 million was capitalized to fixed assets during the three and nine months ended September 30, 2015, respectively. Depreciation expense, inclusive of landfill amortization, was $62.6 million and $185.4 million for the three and nine months ended September 30, 2016, respectively. Depreciation expense, inclusive of landfill amortization, was $59.2 million and $175.5 million for the three and nine months ended September 30, 2015, respectively.


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(7) GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in goodwill for the nine months ended September 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 current period acquisitions
 
8,989

 
4,925

 
18,629

 
17,524

 

 

 
50,067

Measurement period adjustment from prior period acquisitions
 

 

 

 
2,095

 

 

 
2,095

Decrease from disposition of business
 

 
(4,994
)
 

 

 

 

 
(4,994
)
Goodwill impairment charge
 

 

 

 

 
(34,013
)
 

 
(34,013
)
Foreign currency translation and other
 
(619
)
 
1,132

 
98

 
1,957

 
1,805

 

 
4,373

Balance at September 30, 2016
 
$
57,637

 
$
106,349

 
$
68,482

 
$
238,165

 
$

 
$

 
$
470,633

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.

As disclosed in the Company’s quarterly report on Form 10-Q for the period ended June 30, 2016, the Company noted that its Lodging reporting unit has been negatively impacted by persistently weak oil and gas prices that have negatively impacted the Western Canadian energy market and that if these economic difficulties persisted, future impairments might be required. During the first and second quarters of 2016, the Company evaluated the reporting unit’s performance along with other business specific and macroeconomic factors and concluded that no interim impairment test was necessary.
During the quarter ended September 30, 2016 certain events and changes in circumstances arose which led management to conclude that the fair value of the Lodging reporting unit was more likely than not less than its carrying value, and therefore an interim goodwill impairment test was performed. The primary events and changes in circumstances which led to this conclusion were:
Macroeconomic conditions for service companies operating in western Canada’s oil sands region deteriorated in 2016 primarily due to persistently low oil and gas prices. Persistently low prices have caused Lodging’s primary customers to significantly reduce, defer, or cancel oil and gas projects that are in, or had been planned for, this region during periods of more robust commodity pricing.

Government regulatory delays related to oil and gas pipeline projects have reduced management’s confidence that these projects will move forward in a timely manner or in the form that had been originally contemplated by their planners. These projects represented a significant portion of Lodging’s future growth in terms of the demand for temporary accommodations provided by the Lodging reporting unit. While some of these projects have made recent advancements towards successful government approval, the lack of meaningful progress to date does not provide enough positive evidence that a recovery will be significant enough to improve Lodging’s current forecasted outlook.

There have been consecutive historical quarters where business results were significantly less than internal forecasts, and previous actual results, for the Lodging reporting unit.

During the third quarter ended September 30, 2016, management’s near term outlook was clarified in regards to the business’ projections and the impacts of large scale forest fires which took place in the Fort McMurray area of Alberta, Canada where the Company has significant Lodging operations.

Due to the factors listed above, management significantly lowered its 2016 forecasts and long-range performance relative to the Lodging reporting unit.


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In performing Step I of the interim goodwill impairment test, the estimated fair value of the Lodging reporting unit was determined using an income approach with discounted cash flows which were compared to the reporting unit’s carrying value as of September 30, 2016. Based on the results of that evaluation, the carrying amount of the reporting unit, including $34.0 million of goodwill, exceeded Lodging’s estimated fair value and as a result the Company performed Step II of the goodwill impairment test to determine the amount of goodwill impairment that would need to be recognized.
Step II of the goodwill impairment test required the Company to perform a theoretical purchase price allocation for Lodging to determine the implied fair value of its goodwill and then compare that implied fair value to its recorded amount. Estimates and assumptions were used to determine the fair values for Lodging’s long-lived assets in Step II and these involved the use of significant professional judgment on the part of management. The classes of assets that were affected by these estimates and assumptions related most significantly to property, plant, and equipment, goodwill, and intangible assets. Based on the results of this test the implied fair value of goodwill was determined to be $0. Accordingly, the Company recognized a goodwill impairment charge equal to its recorded amount, or $34.0 million, as of September 30, 2016.
The factors contributing to the $34.0 million goodwill impairment charge principally related to events and changes in circumstances discussed above which negatively impacted the Company’s prospective financial information in its discounted cash flow model and the reporting unit's estimated fair value. Lower levels of pricing and an unfavorable change in product mix that reduced expected profit became evident during the third quarter ended September 30, 2016 as management updated the Company's long term projections for the business and as a result decreased the reporting unit’s anticipated future cash flows as compared to those estimated previously. These factors also provided evidence of a longer than expected recovery from current industry lows, which negatively impacted the estimated levels of cash flows in future periods that are assumed in the cash flow model. These factors adversely affected the estimated fair value of the reporting unit and ultimately led to the recognition of the goodwill impairment charge.
As a result of the sale of the Catalyst Services business discussed in Note 4, "Disposition of Business" to the accompanying financial statements, a step 1 goodwill impairment test was also performed relative to the remaining goodwill of $25.1 million in the Industrial Services reporting unit. The results of this test indicated that no impairment of the goodwill exists as of September 30, 2016.
Significant judgments and unobservable inputs categorized as Level III in the fair value hierarchy are inherent in the impairment tests performed and include assumptions about the amount and timing of expected future cash flows, growth rates, and the determination of appropriate discount rates. The Company believes that the assumptions used in its annual and any interim date impairment tests are reasonable, but variations in any of the assumptions may result in different calculations of fair values and impairment charges.
The Company also performed an analysis to determine whether the carrying values of the Lodging segment's finite-lived intangible and other long lived assets may not be entirely recoverable. As of September 30, 2016, the Lodging reporting unit had property, plant and equipment of $99.8 million and other intangible assets of $6.0 million. Based on the analysis performed, sufficient future cash flows are anticipated over those assets' remaining lives to demonstrate recoverability. Thus no impairment charge was recorded related to those other long lived assets.

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As of September 30, 2016 and December 31, 2015, the Company's total finite-lived and indefinite-lived intangible assets consisted of the following (in thousands):
 
September 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
$
170,194

 
$
66,510

 
$
103,684

 
20.3
 
$
161,396

 
$
61,142

 
$
100,254

 
19.0
Customer and supplier relationships
389,002

 
120,922

 
268,080

 
12.5
 
374,866

 
99,463

 
275,403

 
10.1
Other intangible assets
40,266

 
27,548

 
12,718

 
7.8
 
31,416

 
22,581

 
8,835

 
1.5
Total amortizable permits and other intangible assets
599,462

 
214,980

 
384,482

 
14.4
 
567,678

 
183,186

 
384,492

 
10.0
Trademarks and trade names
122,855

 

 
122,855

 
Indefinite
 
122,326

 

 
122,326

 
Indefinite
Total permits and other intangible assets
$
722,317

 
$
214,980

 
$
507,337

 

 
$
690,004

 
$
183,186

 
$
506,818

 

Amortization expense of permits and other intangible assets was $10.8 million and $30.3 million for the three and nine months ended September 30, 2016, respectively. Amortization expense of permits and other intangible assets was $9.9 million and $29.7 million for the three and nine months ended September 30, 2015, respectively.
The expected amortization of the net carrying amount of finite-lived intangible assets at September 30, 2016 was as follows (in thousands):
Years Ending December 31,
Expected Amortization
2016 (three months)
$
9,533

2017
35,325

2018
32,345

2019
29,612

2020
27,316

Thereafter
250,351

 
$
384,482

(8) ACCRUED EXPENSES
Accrued expenses consisted of the following at September 30, 2016 and December 31, 2015 (in thousands):
 
September 30, 2016
 
December 31, 2015
Insurance
$
59,254

 
$
55,899

Interest
21,859

 
20,500

Accrued compensation and benefits
46,921

 
35,646

Income, real estate, sales and other taxes
60,020

 
37,095

Other
38,026

 
44,520

 
$
226,080

 
$
193,660


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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”) from January 1, 2016 through September 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

Liabilities assumed in acquisitions

 
2,408

 
2,408

Adjustments during the measurement period related to 2015 acquisitions

 
657

 
657

New asset retirement obligations
1,650

 

 
1,650

Accretion
1,996

 
1,748

 
3,744

Changes in estimates recorded to statement of operations
(597
)
 
(114
)
 
(711
)
Expenditures
(904
)
 
(709
)
 
(1,613
)
Currency translation and other
130

 
53

 
183

Balance at September 30, 2016
$
34,298

 
$
28,269

 
$
62,567

All of the landfill facilities included in the above were active as of September 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 nine months of 2016 were discounted at the credit-adjusted risk-free rate of 6.23%.
(10) REMEDIAL LIABILITIES 
The changes to remedial liabilities for the nine months ended September 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

Liabilities assumed in acquisition

 

 
4

 
4

Accretion
82

 
2,049

 
1,654

 
3,785

Changes in estimates recorded to statement of operations
71

 
(448
)
 
739

 
362

Expenditures
(88
)
 
(2,957
)
 
(4,716
)
 
(7,761
)
Currency translation and other

 
45

 
654

 
699

Balance at September 30, 2016
$
2,392

 
$
62,302

 
$
64,387

 
$
129,081

In the nine months ended September 30, 2016, there were no significant charges (benefits) resulting from changes in estimates for remedial liabilities.
(11) FINANCING ARRANGEMENTS 
The following table is a summary of the Company’s financing arrangements (in thousands):
 
September 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
(12,423
)
 
(12,457
)
Long-term obligations, at carrying value
$
1,632,577

 
$
1,382,543

   
At September 30, 2016 and December 31, 2015, the fair value of the Company's 2020 Notes was $824.0 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.

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On March 14, 2016, the Company issued $250.0 million aggregate principal amount as additional notes under the indenture pursuant to which the Company previously issued on December 7, 2012 $600.0 million aggregate principal amount of 2021 Notes. Interest payments are paid semi-annually on June 1 and December 1 of each year. At September 30, 2016 and December 31, 2015, the fair value of the Company's 2021 Notes was $866.1 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 September 30, 2016 and December 31, 2015, had no outstanding loan balances. At September 30, 2016, $201.4 million was available to borrow and outstanding letters of credit were $142.0 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 generally 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 generally 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.

On November 1, 2016, the Company entered into an amended and restated credit agreement for its revolving credit facility. Under the amended and restated agreement, the terms are substantially the same as under the prior agreement, but the facility termination date has been extended, subject to certain conditions, until November 1, 2021.
    
(12) (LOSS) EARNINGS PER SHARE     
The following are computations of basic and diluted (loss) earnings per share (in thousands except for per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Numerator for basic and diluted (loss) earnings per share:
 

 
 

 
 
 
 
Net (loss) income
$
(10,255
)
 
$
40,228

 
$
(27,160
)
 
$
43,534

 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Basic shares outstanding
57,487

 
58,161

 
57,575

 
58,799

Dilutive effect of equity-based compensation awards

 
107

 

 
99

Dilutive shares outstanding
57,487

 
58,268

 
57,575

 
58,898

 
 
 
 
 
 
 
 
Basic (loss) earnings per share:
$
(0.18
)
 
$
0.69

 
$
(0.47
)
 
$
0.74

 
 

 
 

 
 

 
 

Diluted (loss) earnings per share:
$
(0.18
)
 
$
0.69

 
$
(0.47
)
 
$
0.74

As a result of the net loss reported for the three and nine months ended September 30, 2016, all then outstanding stock options, restricted stock awards and performance awards totaling 835,482 were excluded from the calculation of diluted (loss) earnings per share as their inclusion would have an antidilutive effect. 

For the three and nine months ended September 30, 2015, the dilutive effect of all then outstanding options, restricted stock and performance awards is included in the EPS calculations above except for 274,257 of outstanding performance stock awards for which the performance criteria were not attained at that time and 10,704 and 42,642, respectively, of restricted stock awards which were antidilutive at that time.


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(13) ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component and related tax effects for the nine months ended September 30, 2016 were as follows (in thousands):    
 
Foreign Currency Translation
 
Unrealized Gains on Available-For-Sale Securities
 
Unfunded Pension Liability
 
Total
Balance at January 1, 2016
$
(252,939
)
 
$

 
$
(1,953
)
 
$
(254,892
)
Other comprehensive income (loss) before reclassifications
43,706

 
(596
)
 

 
43,110

Tax effects

 
238

 

 
238

Other comprehensive income (loss)
$
43,706

 
$
(358
)
 
$

 
$
43,348

Balance at September 30, 2016
$
(209,233
)
 
$
(358
)
 
$
(1,953
)
 
$
(211,544
)
There were no reclassifications out of accumulated other comprehensive loss during the three and nine months ended September 30, 2016 and 2015.

(14) STOCK-BASED COMPENSATION
Total stock-based compensation cost charged to selling, general and administrative expenses for the three and nine months ended September 30, 2016 was $3.0 million and $7.7 million, respectively. Total stock-based compensation cost charged to selling, general and administrative expenses for the three and nine months ended September 30, 2015 was $0.5 million and $6.6 million, respectively. During the three months ended September 30, 2015, the Company reversed $1.4 million of stock based compensation for performance stock awards originally issued in 2014 as management determined it was no longer probable that a portion of the performance targets would be earned. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $0.9 million and $2.3 million for the three and nine months ended September 30, 2016, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $0.1 million and $1.8 million for the three and nine months ended September 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 nine months ended September 30, 2016:
Restricted Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2016
362,618

 
$
55.79

Granted
335,992

 
$
50.87

Vested
(168,565
)
 
$
54.06

Forfeited
(46,298
)
 
$
53.04

Balance at September 30, 2016
483,747

 
$
53.23

    
As of September 30, 2016, there was $17.2 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 3.0 years. The total fair value of restricted stock vested during the three and nine months ended September 30, 2016 was $1.8 million and $7.9 million, respectively. The total fair value of restricted stock vested during the three and nine months ended September 30, 2015 was $0.6 million and $6.8 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

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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 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 nine months ended September 30, 2016:
Performance Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2016
187,274

 
$
57.13

Granted
207,624

 
$
54.21

Vested
(8,420
)
 
$
61.90

Forfeited
(33,469
)
 
$
55.96

Balance at September 30, 2016
353,009

 
$
55.39


As of September 30, 2016, there was $0.2 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 September 30, 2016. The total fair value of performance awards vested during the nine months ended September 30, 2016 was $0.4 million. The total fair value of performance awards vested during the nine months ended September 30, 2015 was $0.3 million. No performance awards vested during the three months ended September 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 nine months ended September 30, 2016, the Company repurchased and retired a total of 0.1 million shares and 0.3 million shares, respectively, of the Company's common stock for a total cost of $6.2 million and $16.3 million, respectively. During the three and nine months ended September 30, 2015, the Company repurchased and retired a total of 0.8 million shares and 1.3 million shares, respectively, of the Company's common stock for a total cost of $37.6 million and $69.8 million, respectively. Through September 30, 2016, the Company has repurchased and retired a total of 3.7 million shares of the Company's common stock for a total cost of $194.0 million under this program. As of September 30, 2016, an additional $106.0 million remains available for repurchase of shares under the current authorized program.
(15) 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 September 30, 2016 and December 31, 2015, the Company had recorded reserves of $20.9 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 September 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 September 30, 2016 and December 31, 2015, the $20.9 million and $21.9 million, respectively, of reserves consisted of (i) $18.3 million and $18.9 million, respectively, related to pending legal or

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administrative proceedings, including Superfund liabilities, which were included in remedial liabilities on the consolidated balance sheets, and (ii) $2.6 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.
As of September 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 September 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 September 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 September 30, 2016. From January 1, 2016 to September 30, 2016, 18 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, three (including the BR Facility described below) involve facilities that are now owned or leased by the Company and 126 involve third party sites to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes. Of the 126 third party sites, 32 are now settled, 17 are currently requiring expenditures on remediation and 77 are not currently requiring expenditures on remediation.

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In connection with each site, the Company has estimated the extent, if any, to which it may be subject, either directly or as a result of any indemnification obligations, for cleanup and remediation costs, related legal and consulting costs associated with PRP investigations, settlements, and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability (if any) of the Company or the prior owners of certain of the Company's facilities to contribute a portion of the cleanup costs, the assumptions that must be made in calculating the estimated cost and timing of remediation, the identification of other PRPs and their respective capability and obligation to contribute to remediation efforts, and the existence and legal standing of indemnification agreements (if any) with prior owners, which may either benefit the Company or subject the Company to potential indemnification obligations. Clean Harbors believes its potential liability could exceed $100,000 at 11 of the 126 third party sites.
BR Facility.    The Company acquired in 2002 a former hazardous waste incinerator and landfill in Baton Rouge (the "BR Facility"), for which operations had been previously discontinued by the prior owner. In September 2007, the EPA issued a special notice letter to the Company related to the Devil's Swamp Lake Site ("Devil's Swamp") in East Baton Rouge Parish, Louisiana. Devil's Swamp includes a lake located downstream of an outfall ditch where wastewater and storm water have been discharged, and Devil's Swamp is proposed to be included on the National Priorities List due to the presence of Contaminants of Concern ("COC") cited by the EPA. These COCs include substances of the kind found in wastewater and storm water discharged from the BR Facility in past operations. The EPA originally requested COC generators to submit a good faith offer to conduct a remedial investigation feasibility study directed towards the eventual remediation of the site. 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 126 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 and McKesson are paying all costs of defending those subsidiaries in those 17 cases, including legal fees and settlement costs. However, there can be no guarantee that the Company's ultimate liabilities for those sites will not exceed the amount recorded or that indemnities applicable to any of these sites will be available to pay all or a portion of related costs. Except for the indemnification agreements which the Company holds from ChemWaste, McKesson and one other entity, the Company does not have an indemnity agreement with respect to any of the 126 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 September 30, 2016 and December 31, 2015, there were five 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.
(16) 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 did not record any tax charges or benefits as a result of the goodwill impairment charges recorded in the third quarter of 2016 and in the second quarter of 2015. Absent the impact of the impairment charges on pre-tax income from operations the Company’s effective tax rate for the three and nine months ended September 30, 2016 was 47.8% and 80.3% compared to 46.2% and 44.4%, respectively, for the same periods in 2015. The variations in the effective income tax rates for the three and nine months ended September 30, 2016 as compared to more customary relationships between pre-tax income and the provision for income taxes were primarily due to the Company not recognizing income tax benefits from current operating losses related to certain Canadian entities as well as the impacts of the non-deductible goodwill impairment charge.

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Table of Contents

As of September 30, 2016 and December 31, 2015, the Company had recorded $1.8 million and $2.1 million, respectively, of liabilities for unrecognized tax benefits and $0.3 million and $0.4 million of interest, respectively.
Due to expiring statute of limitation periods, the Company believes that total unrecognized tax benefits will not decrease within the next 12 months.

(17) 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 September 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 (loss) income 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 nine months ended September 30, 2016 and 2015 (in thousands):
 
For the Three Months Ended September 30, 2016
 
For the Three Months Ended September 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
$
232,482

 
$
38,795

 
$
492

 
$
271,769

 
$
253,069

 
$
34,819

 
$
506

 
$
288,394

Industrial and Field Services
162,118

 
(12,734
)
 
(32
)
 
149,352

 
307,226

 
(6,973
)
 
(313
)
 
299,940

Kleen Performance Products
102,318

 
(9,761
)
 

 
92,557

 
100,827

 
(23,744
)
 
(6
)
 
77,077

SK Environmental Services
194,764

 
(18,955
)
 
1

 
175,810

 
171,832

 
(5,947
)
 
2

 
165,887

Lodging Services
15,520

 
233

 
19

 
15,772

 
13,507

 
743

 
30

 
14,280

Oil and Gas Field Services
22,197

 
2,422

 
86

 
24,705

 
46,788

 
1,102

 
92

 
47,982

Corporate Items
121

 

 
(566
)
 
(445
)
 
117

 

 
(311
)
 
(194
)
Total
$
729,520

 
$

 
$

 
$
729,520

 
$
893,366

 
$

 
$

 
$
893,366


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Table of Contents

 
For the Nine Months Ended September 30, 2016
 
For the Nine Months Ended September 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
$
680,717

 
$
109,217

 
$
1,547

 
$
791,481

 
$
741,419

 
$
108,037

 
$
2,886

 
$
852,342

Industrial and Field Services
437,546

 
(29,255
)
 
(335
)
 
407,956

 
807,423

 
(24,764
)
 
(636
)
 
782,023

Kleen Performance Products
256,572

 
(26,768
)
 
(1
)
 
229,803

 
296,738

 
(63,429
)
 
(8
)
 
233,301

SK Environmental Services
565,186

 
(59,561
)
 
369

 
505,994

 
508,392

 
(26,331
)
 
5

 
482,066

Lodging Services
47,583

 
634

 
54

 
48,271

 
68,782

 
1,899

 
127

 
70,808

Oil and Gas Field Services
73,445

 
5,733

 
221

 
79,399

 
138,992

 
4,588

 
141

 
143,721

Corporate Items
2,064

 

 
(1,855
)
 
209

 
347

 

 
(2,515
)
 
(2,168
)
Total
$
2,063,113

 
$

 
$

 
$
2,063,113

 
$
2,562,093

 
$

 
$

 
$
2,562,093

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 Nine Months Ended
 
September 30,
 
September 30,
 
2016
 
2015
 
2016
 
2015
Adjusted EBITDA:
 

 
 

 
 
 
 
Technical Services
$
72,333

 
$
79,048

 
$
201,622

 
$
219,257

Industrial and Field Services
18,579

 
62,460

 
40,643

 
145,850

Kleen Performance Products
22,803

 
12,123

 
37,358

 
23,471

SK Environmental Services
47,250

 
40,096

 
127,984

 
108,540

Lodging Services
4,104

 
1,827

 
8,145

 
12,589

Oil and Gas Field Services
(4,425
)
 
1,579

 
(10,026
)
 
800

Corporate Items
(33,993
)
 
(31,526
)
 
(101,310
)
 
(103,501
)
Total
$
126,651

 
$
165,607

 
$
304,416

 
$
407,006

Reconciliation to Consolidated Statements of Operations:
 

 
 

 
 
 
 
Accretion of environmental liabilities
2,476

 
2,577

 
7,529

 
7,795

Depreciation and amortization
73,360

 
69,060

 
215,655

 
205,189

Goodwill impairment charge
34,013

 

 
34,013

 
31,992

Income from operations
16,802

 
93,970

 
47,219

 
162,030

Other expense
198

 
139

 
737

 
390

Gain on sale of business
(16,431
)
 

 
(16,431
)
 

Interest expense, net of interest income
21,565

 
19,017

 
62,192

 
57,704

Income before provision for income taxes
$
11,470

 
$
74,814

 
$
721

 
$
103,936


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The following table presents certain assets by reportable segment and in the aggregate (in thousands):
 
September 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
$
521,040

 
$
211,712

 
$
260,608

 
$
328,655

 
$
99,764

 
$
139,137

 
$
87,655

 
$
1,648,571

Goodwill
57,637

 
106,349

 
68,482

 
238,165

 

 

 

 
470,633

Permits and other intangibles, net
74,646

 
11,490

 
141,039

 
264,864

 
5,951

 
9,347

 

 
507,337

Total assets
$
859,794

 
$
366,929

 
$
605,160

 
$
920,333

 
$
142,948

 
$
229,480

 
$
587,969

 
$
3,712,613

 
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):
 
September 30, 2016
 
December 31, 2015
United States
$
2,944,936

 
$
2,575,746

Canada
767,677

 
851,949

Other foreign

 
3,733

Total
$
3,712,613

 
$
3,431,428

(18) 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 the Company sells 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 11, “Financing Arrangements,” to the Company's consolidated financial statements included herein, on March 14, 2016, Parent issued $250.0 million aggregate principal amount of additional 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 September 30, 2016.






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

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
51,334

 
$
170,183

 
$
36,340

 
$

 
$
257,857

Intercompany receivables
190,728

 
300,656

 
34,665

 
(526,049
)
 

Accounts receivable, net

 
418,170

 
94,206

 

 
512,376

Other current assets
2,537

 
207,488

 
69,673

 

 
279,698

Property, plant and equipment, net

 
1,217,704

 
430,867

 

 
1,648,571

Investments in subsidiaries
2,813,894

 
488,437

 

 
(3,302,331
)
 

Intercompany debt receivable

 
212,171

 
3,701

 
(215,872
)
 

Goodwill

 
417,992

 
52,641