Company Quick10K Filing
Quick10K
Clean Harbors
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$60.31 56 $3,380
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2018-10-31 Earnings, Exhibits
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-07-19 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-07-03 Other Events, Exhibits
8-K 2018-06-19 Other Events, Exhibits
8-K 2018-06-06 Shareholder Vote
8-K 2018-04-17 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-17 Other Events, Exhibits
RSG Republic Services
WCN Waste Connections
SRCL Stericycle
ADSW Advanced Disposal Services
CWST Casella Waste Systems
ECOL US Ecology
POPE Pope Resources Partnership
ESTR Estre
SMED Sharps Compliance
PESI Perma Fix Environmental Services
CLH 2018-09-30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure
Item 5. Other Information
Item 6. Exhibits
EX-31.1 clh-9302018ex311.htm
EX-31.2 clh-9302018ex312.htm
EX-32 clh-9302018ex32.htm

Clean Harbors Earnings 2018-09-30

CLH 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 clh-9302018xq3.htm 10-Q Document

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, 2018
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 every Interactive Data File required to be submitted 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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth 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
 
 
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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
 
56,005,486
(Class)
 
(Outstanding as of October 26, 2018)



CLEAN HARBORS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

 
September 30, 2018
 
December 31, 2017
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
215,497

 
$
319,399

Short-term marketable securities
37,380

 
38,179

Accounts receivable, net of allowances aggregating $32,260 and $27,799, respectively
608,645

 
528,924

Unbilled accounts receivable
63,964

 
35,922

Deferred costs
19,849

 
20,445

Inventories and supplies
196,045

 
176,012

Prepaid expenses and other current assets
35,441

 
35,175

Total current assets
1,176,821

 
1,154,056

Property, plant and equipment, net
1,614,429

 
1,587,365

Other assets:
 
 
 
Goodwill
514,102

 
478,523

Permits and other intangibles, net
451,355

 
469,128

Other
17,622

 
17,498

Total other assets
983,079

 
965,149

Total assets
$
3,774,329

 
$
3,706,570

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term obligations
$
7,535

 
$
4,000

Accounts payable
248,405

 
224,231

Deferred revenue
65,172

 
67,822

Accrued expenses
229,932

 
187,982

Current portion of closure, post-closure and remedial liabilities
25,256

 
19,782

Total current liabilities
576,300

 
503,817

Other liabilities:
 
 
 
Closure and post-closure liabilities, less current portion of $9,576 and $6,444, respectively
57,805

 
54,593

Remedial liabilities, less current portion of $15,680 and $13,338, respectively
105,032

 
111,130

Long-term obligations, less current portion
1,616,156

 
1,625,537

Deferred taxes, unrecognized tax benefits and other long-term liabilities
221,712

 
223,291

Total other liabilities
2,000,705

 
2,014,551

Commitments and contingent liabilities (See Note 16)


 


Stockholders’ equity:
 
 
 
Common stock, $.01 par value:
 
 
 
Authorized 80,000,000; shares issued and outstanding 55,997,893 and 56,501,190 shares, respectively
560

 
565

Additional paid-in capital
661,546

 
686,962

Accumulated other comprehensive loss
(185,505
)
 
(172,407
)
Accumulated earnings
720,723

 
673,082

Total stockholders’ equity
1,197,324

 
1,188,202

Total liabilities and stockholders’ equity
$
3,774,329

 
$
3,706,570

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

1



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,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Service revenues
$
685,183

 
$
612,352

 
$
2,001,681

 
$
1,783,506

Product revenues
157,998

 
143,494

 
440,418

 
414,069

Total revenues
843,181

 
755,846

 
2,442,099

 
2,197,575

Cost of revenues: (exclusive of items shown separately below)
 
 
 
 
 
 
 
Service revenues
464,612

 
412,369

 
1,385,684

 
1,215,812

Product revenues
116,073

 
107,226

 
325,010

 
320,171

Total cost of revenues
580,685

 
519,595

 
1,710,694

 
1,535,983

Selling, general and administrative expenses
121,219

 
113,252

 
362,302

 
337,767

Accretion of environmental liabilities
2,450

 
2,347

 
7,328

 
7,053

Depreciation and amortization
73,082

 
72,989

 
220,686

 
216,932

Income from operations
65,745

 
47,663

 
141,089

 
99,840

Other expense, net
(996
)
 
(432
)
 
(449
)
 
(2,814
)
Loss on early extinguishment of debt
(2,469
)
 
(1,846
)
 
(2,469
)
 
(7,891
)
(Loss) gain on sale of business

 
(77
)
 

 
31,645

Interest expense, net of interest income of $736, $573, $2,086 and $1,098, respectively
(19,916
)
 
(20,675
)
 
(60,955
)
 
(65,743
)
Income before provision for income taxes
42,364

 
24,633

 
77,216

 
55,037

Provision for income taxes
11,275

 
12,575

 
28,011

 
38,492

Net income
$
31,089

 
$
12,058

 
$
49,205

 
$
16,545

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.55

 
$
0.21

 
$
0.88

 
$
0.29

Diluted
$
0.55

 
$
0.21

 
$
0.87

 
$
0.29

Shares used to compute earnings per share - Basic
56,059

 
57,033

 
56,222

 
57,149

Shares used to compute earnings per share - Diluted
56,291

 
57,195

 
56,360

 
57,280


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

2


CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
31,089

 
$
12,058

 
$
49,205

 
$
16,545

Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized (losses) gains on available-for-sale securities (net of taxes of $7, $7, $95 and $129, respectively)
(932
)
 
11

 
(1,138
)
 
170

Reclassification adjustment for losses on available-for-sale securities included in net income (net of taxes of $0, $0, $0 and $79, respectively)

 

 

 
143

Unrealized loss on interest rate hedge (net of taxes of $0, $0, $0 and $0)
(310
)
 

 
(310
)
 

Foreign currency translation adjustments (including a tax benefit of $5.6 million in the nine months ended September 30, 2018)
9,832

 
23,698

 
(11,650
)
 
44,545

Other comprehensive income (loss)
8,590

 
23,709

 
(13,098
)
 
44,858

Comprehensive income
$
39,679

 
$
35,767

 
$
36,107

 
$
61,403


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


3


CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Nine Months Ended
 
September 30,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
49,205

 
$
16,545

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation and amortization
220,686

 
216,932

Allowance for doubtful accounts
6,869

 
5,635

Amortization of deferred financing costs and debt discount
2,841

 
2,562

Accretion of environmental liabilities
7,328

 
7,053

Changes in environmental liability estimates
(301
)
 
(312
)
Deferred income taxes
61

 
184

Stock-based compensation
10,726

 
9,212

Other expense, net
449

 
2,814

Gain on sale of business

 
(31,645
)
Loss on early extinguishment of debt
2,469

 
7,891

Environmental expenditures
(7,238
)
 
(10,078
)
Changes in assets and liabilities, net of acquisitions
 
 
 
Accounts receivable and unbilled accounts receivable
(76,249
)
 
(38,122
)
Inventories and supplies
(20,534
)
 
(4,975
)
Other current assets
(523
)
 
18,305

Accounts payable
22,041

 
(7,085
)
Other current and long-term liabilities
29,385

 
26,553

 Net cash from operating activities
247,215

 
221,469

Cash flows used in investing activities:
 
 
 
Additions to property, plant and equipment
(150,722
)
 
(127,736
)
Proceeds from sale and disposal of fixed assets
6,111

 
5,375

Acquisitions, net of cash acquired
(151,023
)
 
(44,432
)
Proceeds from sale of businesses, net of transactional costs

 
46,339

Additions to intangible assets, including costs to obtain or renew permits
(3,500
)
 
(1,348
)
  Proceeds from sale of available-for-sale securities
20,123

 
376

Purchases of available-for-sale securities
(20,471
)
 

Net cash used in investing activities
(299,482
)
 
(121,426
)
Cash flows used in financing activities:
 
 
 
Change in uncashed checks
(3,476
)
 
(8,657
)
Proceeds from exercise of stock options

 
46

Tax payments related to withholdings on vested restricted stock
(2,566
)
 
(2,321
)
Repurchases of common stock
(33,581
)
 
(24,465
)
Deferred financing costs paid
(3,938
)
 
(5,746
)
Premiums paid on early extinguishment of debt
(1,219
)
 
(6,028
)
Principal payment on debt
(403,884
)
 
(401,000
)
Issuance of senior secured notes, net of discount
348,250

 
399,000

Borrowing from revolving credit facility
50,000

 

Net cash used in financing activities
(50,414
)
 
(49,171
)
Effect of exchange rate change on cash
(1,221
)
 
3,789

(Decrease) increase in cash and cash equivalents
(103,902
)
 
54,661

Cash and cash equivalents, beginning of period
319,399

 
306,997

Cash and cash equivalents, end of period
$
215,497

 
$
361,658

Supplemental information:
 
 
 
Cash payments for interest and income taxes:
 
 
 
Interest paid
$
58,312

 
$
67,550

Income taxes paid
16,071

 
14,321

Non-cash investing activities:
 
 
 
Property, plant and equipment accrued
13,834

 
14,509

Transfer of inventory to property, plant and equipment

 
12,641

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
 
 
 
Accumulated
Other
Comprehensive Loss
 
 
 
 
 
Number
of
Shares
 
$ 0.01
Par
Value
 
Additional
Paid-in
Capital
 
 
Accumulated
Earnings
 
Total
Stockholders’
Equity
Balance at January 1, 2018
56,501

 
$
565

 
$
686,962

 
$
(172,407
)
 
$
673,082

 
$
1,188,202

Cumulative effect of change in accounting principle

 

 

 

 
(1,564
)
 
(1,564
)
Net income

 

 

 

 
49,205

 
49,205

Other comprehensive loss

 

 

 
(13,098
)
 

 
(13,098
)
Stock-based compensation

 

 
10,726

 

 

 
10,726

Issuance of restricted shares, net of shares remitted and tax withholdings
133

 
1

 
(2,567
)
 

 

 
(2,566
)
Repurchases of common stock
(636
)
 
(6
)
 
(33,575
)
 

 

 
(33,581
)
Balance at September 30, 2018
55,998

 
$
560

 
$
661,546

 
$
(185,505
)
 
$
720,723

 
$
1,197,324



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


5


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, 2017.
(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, 2017. There have been no material changes in these policies or their application except for the changes described below.
Changes in Reporting Segments
During the first quarter of fiscal year 2018, certain of the Company's businesses undertook a reorganization which included changes to the underlying business and management structures. The reorganization resulted in combining the Environmental Services businesses from an operational and management perspective and is expected to deepen customer relationships and allow for efficiencies across the Company's operations through the sharing of resources, namely labor and equipment which will reduce third party spend and promote the cross selling of such business offerings. In connection with this reorganization, the Company’s chief operating decision maker also requested changes in the information that he regularly reviews for purposes of allocating resources and assessing performance. These changes required a reconsideration of the Company’s operating segments in the first quarter of 2018 and resulted in a change in the Company’s assessment of its operating segments. Upon reconsideration of the identification of the Company’s operating segments, the Company concluded that there are now two operating segments for disclosure in accordance with ASC 280 Segment reporting; (i) the Environmental Services segment which consists of the Company’s historical Technical Services, Industrial Services, Field Services and Oil, Gas and Lodging businesses and (ii) the Safety-Kleen segment. See Note 18, "Segment Reporting," for more information. The amounts presented for the three and nine months ended September 30, 2017 have been recast to reflect the impact of such changes. These reclassifications and adjustments had no effect on the consolidated statements of operations, consolidated statements of comprehensive income, consolidated statements of cash flows or consolidated statements of stockholders' equity for any of the periods presented.
Recent Accounting Pronouncements
Standards implemented
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which replaces numerous requirements in U.S. GAAP, including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). On January 1, 2018, the Company adopted Topic 606 using the modified retrospective method for all contracts. Results for reporting periods beginning on the date of adoption are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historical accounting methodology pursuant to ASC 605, Revenue Recognition. Upon adoption, a cumulative effect adjustment was not required as the majority of the Company’s contracts are recognized based on time and materials incurred and were not impacted by the new guidance. The Company has concluded that the most significant impact of the standard relates to the incremental disclosures required.
In October 2016, the FASB issued ASU 2016-16, Income Tax - Intra-Entity Transfers of Assets Other than Inventory. The amendment improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The

6


Company adopted the amendment on a modified retrospective basis effective January 1, 2018. As a result of adoption, the Company recorded a cumulative effect adjustment that reduced retained earnings by $1.6 million.
In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendment requires an employer to report the service cost component of net benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. In addition, the amendment allows only the service cost component to be eligible for capitalization when applicable. The Company adopted the amendment in the first quarter of 2018. Adoption did not have a material impact on the Company's consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendment better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The Company adopted the amendment in the third quarter of 2018. Adoption did not have a material impact on the Company's consolidated financial statements.
Standards to be implemented
The Company is 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. In February 2018, FASB issued ASU 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. The amendment clarifies that land easements are within the scope of the new leases standard (ASC 842) and introduces a new transition practical expedient allowing a company to not assess whether existing and expired land easements that were not previously accounted for as leases under current US GAAP (ASC 840) are or contain leases under ASC 842. In July 2018, FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. The amendment provides improvements that clarify specific aspects of the guidance in ASU 2016-02. In August 2018, FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. The amendment provides entities with an additional (and optional) transition method to adopt the new leases standard and provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if certain criteria are met. The Company will adopt the new standard beginning on January 1, 2019. While the Company is still continuing to assess the effect of adoption, it expects that the new standard will have a material effect on its consolidated balance sheet related to the recognition of new assets and lease liabilities. In preparation for the adoption of the guidance, the Company is in the process of implementing new software, testing and validating the data in the new software and changing controls and processes to enable the preparation of financial information.
(3) REVENUES
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Nature of Goods and Services
The Company generates services and product revenues through its Environmental Services and Safety-Kleen operating segments. The majority of the Company’s contracts are for services, which are recognized based on time and materials incurred at contractually agreed-upon rates. Product revenues are recognized when the products are delivered and control transfers to the customer. The Company’s payment terms vary by the type and location of its customers and the products or services offered. The term between invoicing and when payment is due is not significant. The Company excludes sales taxes that it collects from customers from its revenues.


7


Disaggregation of Revenue
The following table presents the Company’s revenues disaggregated by revenue source (in thousands):
 
 
For the Three Months Ended September 30, 2018
 
 
Environmental Services
 
Safety-Kleen
 
Corporate
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
 
United States
 
$
410,792

 
$
307,497

 
$
(66
)
 
$
718,223

Canada
 
98,021

 
26,404

 
533

 
124,958

Total third party revenues
 
$
508,813

 
$
333,901

 
$
467

 
$
843,181

 
 
 
 
 
 
 
 
 
Sources of Revenue (1)
 
 
 
 
 
 
 
 
Technical Services
 
$
264,769

 
$

 
$

 
$
264,769

Field and Emergency Response Services
 
77,025

 

 

 
77,025

Industrial Services
 
134,323

 

 

 
134,323

Oil, Gas and Lodging Services and Other
 
32,696

 

 
467

 
33,163

Safety-Kleen Environmental Services
 

 
200,681

 

 
200,681

Kleen Performance Products
 

 
133,220

 

 
133,220

Total third party revenues
 
$
508,813

 
$
333,901

 
$
467

 
$
843,181

 
 
For the Three Months Ended September 30, 2017
 
 
Environmental Services
 
Safety-Kleen
 
Corporate
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
 
United States
 
$
334,625

 
$
290,653

 
$
468

 
$
625,746

Canada
 
105,538

 
24,375

 
187

 
130,100

Total third party revenues
 
$
440,163

 
$
315,028

 
$
655

 
$
755,846

 
 
 
 
 
 
 
 
 
Sources of Revenue (1)
 
 
 
 
 
 
 
 
Technical Services
 
$
246,323

 
$

 
$

 
$
246,323

Field and Emergency Response Services
 
76,446

 

 

 
76,446

Industrial Services
 
90,894

 

 

 
90,894

Oil, Gas and Lodging Services and Other
 
26,500

 

 
655

 
27,155

Safety-Kleen Environmental Services
 

 
191,420

 

 
191,420

Kleen Performance Products
 

 
123,608

 

 
123,608

Total third party revenues
 
$
440,163

 
$
315,028

 
$
655

 
$
755,846

 
 
For the Nine Months Ended September 30, 2018
 
 
Environmental Services
 
Safety-Kleen
 
Corporate
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
 
United States
 
$
1,162,891

 
$
901,198

 
$
442

 
$
2,064,531

Canada
 
305,526

 
71,336

 
706

 
377,568

Total third party revenues
 
$
1,468,417

 
$
972,534

 
$
1,148

 
$
2,442,099

 
 
 
 
 
 
 
 
 
Sources of Revenue (1)
 
 
 
 
 
 
 
 
Technical Services
 
$
758,081

 
$

 
$

 
$
758,081

Field and Emergency Response Services
 
223,052

 

 

 
223,052

Industrial Services
 
399,132

 

 

 
399,132

Oil, Gas and Lodging Services and Other
 
88,152

 

 
1,148

 
89,300

Safety-Kleen Environmental Services
 

 
594,876

 

 
594,876

Kleen Performance Products
 

 
377,658

 

 
377,658

Total third party revenues
 
$
1,468,417

 
$
972,534

 
$
1,148

 
$
2,442,099


8



 
 
For the Nine Months Ended September 30, 2017
 
 
Environmental Services
 
Safety-Kleen
 
Corporate
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
 
United States
 
$
991,731

 
$
843,341

 
$
756

 
$
1,835,828

Canada
 
293,970

 
67,544

 
233

 
361,747

Total third party revenues
 
$
1,285,701

 
$
910,885

 
$
989

 
$
2,197,575

 
 
 
 
 
 
 
 
 
Sources of Revenue (1)
 
 
 
 
 
 
 
 
Technical Services
 
$
731,028

 
$

 
$

 
$
731,028

Field and Emergency Response Services
 
208,172

 

 

 
208,172

Industrial Services
 
265,695

 

 

 
265,695

Oil, Gas and Lodging Services and Other
 
80,806

 

 
989

 
81,795

Safety-Kleen Environmental Services
 

 
575,964

 

 
575,964

Kleen Performance Products
 

 
334,921

 

 
334,921

Total third party revenues
 
$
1,285,701

 
$
910,885

 
$
989

 
$
2,197,575


______________________
1.
All revenue except Kleen Performance Products and product sales within Safety-Kleen Environmental Services, which includes allied products and direct blended oil sales, are recognized over time. Kleen Performance Products and Safety-Kleen Environmental Services product sales are recognized at a point in time.
Technical Services. Technical Services revenues are generated from fees charged for waste material management and disposal services including onsite environmental management services, collection and transportation, packaging, recycling, treatment and disposal of waste. Revenue is primarily generated by short-term projects, most of which are governed by master service agreements that are long-term in nature. These master service agreements are typically entered into with the Company's larger customers and outline the pricing and legal frameworks for such arrangements. Services are provided based on purchase orders or agreements with the customer and include prices based upon units of volume of waste, and transportation and other fees. Collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the service as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Revenues for treatment and disposal of waste are recognized upon completion of treatment, final disposition in a landfill or incineration, or when the waste is shipped to a third party for processing and disposal. The Company periodically enters into bundled arrangements for the collection and transportation and disposal of waste. For such arrangements, transportation and disposal are considered distinct performance obligations and the Company allocates revenue to each based on their relative standalone selling price (i.e. the estimated price that a customer would pay for the services on a standalone basis). Revenues from waste that is not yet completely processed and disposed and the related costs are deferred. The revenue is recognized and the deferred costs are expensed when the related services are completed. The period between collection and transportation and the final processing and disposal ranges depending on location of the customer, but generally is measured in days.
Field and Emergency Response Services. Field Services revenues are generated from cleanup services at customer sites, including municipalities and utilities, or other locations on a scheduled or emergency response basis. Services include confined space entry for tank cleaning, site decontamination, large remediation projects, demolition, spill cleanup on land and water, railcar cleaning, product recovery and transfer and vacuum services. Additional services include filtration and water treatment services. Response services for environmental emergencies include any scale from man-made disasters such as oil spills, to natural disasters such as hurricanes. These services are provided based on purchase orders or agreements with customers and include prices generally based upon daily, hourly or job rates for equipment, materials and personnel. The Company recognizes revenue for these services over time, as the customer receives and consumes the benefits of the service as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. The duration of such services can be over a number of hours, several days or even months for larger scale projects.
Industrial Services. Industrial Services revenues are generated from industrial and specialty services provided to refineries, mines, upgraders, chemical plants, pulp and paper mills, manufacturing facilities, power generation facilities and other industrial customers throughout North America. Services include in-plant cleaning and maintenance services, plant outage and turnaround

9


services, decoking and pigging, chemical cleaning, high and ultra-high pressure water cleaning, pipeline inspection and coating services, large tank and surface impoundment cleaning, oilfield transport, daylighting, production services and directional boring services (previously included in Oil, Gas and Lodging service offerings) supporting drilling, completions and production programs. These services are provided based on purchase orders or agreements with the customer and include prices based upon daily, hourly or job rates for equipment, materials and personnel. The Company recognizes revenue for these services over time, as the customer receives and consumes the benefits of the service as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred.
Safety-Kleen Environmental Services. Safety-Kleen Environmental Services revenues are generated from providing parts washer services, containerized waste handling and disposal services, oil collection services, direct sales of blended oil products, and other complementary services and product sales. Containerized waste services consist of profiling, collecting, transporting and recycling or disposing of a wide variety of waste. Other products and services include vacuum services, sale of allied supply products and other environmental services. Revenues from parts washer services include fees charged to customers for their use of parts washer equipment, to clean and maintain parts washer equipment and to remove and replace used cleaning fluids. Parts washer services are considered a single performance obligation due to the highly integrated and interdependent nature of the arrangement. Revenue from parts washer services is recognized over the service interval as the customer receives the benefit of the service. Collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the service as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Product revenue is recognized upon the transfer of control. Control transfers when the products are delivered to the customer.
Kleen Performance Products. Kleen Performance Products revenues are generated from sales of high quality base and blended lubricating oils to third-party distributors, government agencies, fleets, railroads and industrial customers. The business also sells recycled fuel oil to asphalt plants, industrial plants, blenders, pulp and paper companies, vacuum gas oil producers and marine diesel oil producers. Revenue for oil products is recognized at a point in time, upon the transfer of control. Control transfers when the products are delivered to the customer.
Oil, Gas and Lodging Services and Other. Oil, Gas and Lodging Services and Other is primarily comprised of revenues generated from providing Oil and Gas Field Services that support upstream activities such as exploration and drilling for oil and gas companies and Lodging Services to customers in Western Canada. The Company recognizes Oil and Gas Field Services revenue over time, as the customer receives and consumes the benefits of the service as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Revenue for lodging accommodation services is recognized over time based on passage of time. Revenue for manufacturing services is recognized over time using a cost-to-cost measure of progress or completed units to depict the transfer of assets to the customer.
Contract Balances
 
 
September 30, 2018
 
December 31, 2017
 
September 30, 2017
 
December 31, 2016
Receivables
 
$
608,645

 
$
528,924

 
$
531,696

 
$
496,226

Contract Assets (Unbilled Receivables)
 
63,964

 
35,922

 
40,933

 
36,190

Contract Liabilities (Deferred Revenue)
 
65,172

 
67,822

 
69,236

 
64,397


The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits or deferred revenue (contract liabilities) on the Consolidated Balance Sheet. Generally, billing occurs subsequent to revenue recognition, as a right to payment is not just subject to passage of time, resulting in contract assets. Contract assets are generally classified as current. The Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the Consolidated Balance Sheet on a contract-by-contract basis at the end of each reporting period. As part of the acquisition of the Veolia Business on February 23, 2018, the Company acquired receivables and contract assets of $20.5 million and $17.7 million, respectively. Changes in the contract asset and liability balances during the nine-month periods ended September 30, 2018 and September 30, 2017 were not materially impacted by any other factors. The contract liability balances at the beginning of each period presented were fully recognized in the subsequent three-month period.


10


Remaining Performance Obligations
Remaining performance obligations represent the transaction price of orders for which work has not been performed. As of September 30, 2018, all remaining performance obligations were for contracts with an original expected length of one year or less.
Variable Consideration
The nature of the Company's contracts gives rise to certain types of variable consideration, including in limited cases volume and payment discounts. The Company estimates the amount of variable consideration to include in the estimated transaction price based on historical experience, anticipated performance and its best judgment at the time and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Variable consideration was not material in any of the periods presented.
Contract Costs
Contract costs include direct and incremental costs to obtain or fulfill a contract. The Company’s contract costs that are subject to capitalization are comprised of costs associated with parts washer services and costs associated with the treatment and disposal of waste. Parts washer costs include costs of solvent, commissions paid relating to revenue generated from parts washer services, and transportation costs associated with transferring the product picked up from the services as it is returned to the Company’s facilities or a third party site. Costs related to the treatment of waste include costs for waste receiving, drum movement and storage, waste consolidation and transportation between facilities. Deferred costs associated with parts washer services are amortized ratably over the average service interval, which ranges between seven and 14 weeks. Deferred costs related to treatment and disposal of waste are recognized when the corresponding waste is disposed of and are included in Deferred Costs within total current assets in the Company’s consolidated balance sheets. The deferred contract cost balances at the beginning of each period presented were fully recognized in cost of revenue in the subsequent three-month period.
 
(4) BUSINESS COMBINATIONS
2018 Acquisition
        
On August 31, 2018, Clean Harbors acquired a privately owned company which is expected to expand the environmental services and waste oil capabilities of the Company. The acquired company is included in the Safety-Kleen and Environmental Services segments. In connection with this acquisition, a preliminary goodwill amount of $16.0 million was recognized.
On February 23, 2018, the Company completed the acquisition of the U.S. Industrial Cleaning Business of Veolia Environmental Services North America LLC (the "Veolia Business"). The acquisition provides significant scale and industrial services capabilities while increasing the size of the Company's existing U.S. Industrial Services business. The Company acquired the Veolia Business for a purchase price of $120.0 million subject to certain post-closing adjustments. The acquisition was financed with cash on hand. The amount of revenue from the Veolia Business included in the Company's results of operations for the three and nine months ended September 30, 2018 was $44.9 million and $108.8 million, respectively. The amount of pre-tax (loss) income for the three and nine months ended September 30, 2018 was $(0.8) million and $2.5 million, respectively. During the three and nine months ended September 30, 2018, the Company incurred acquisition-related costs of approximately $0.2 million and $1.2 million, respectively, in connection with the transaction which are included in selling, general and administrative expenses in the consolidated statements of operations. The Veolia Business is included in the Environmental Services segment.

11



The allocation of the Veolia Business purchase price was based on preliminary estimates of the fair value of assets acquired and liabilities assumed as of February 23, 2018, as 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 Date
 
Measurement Period Adjustments
 
At Acquisition Date As Reported September 30, 2018
Accounts receivable, including unbilled receivables
$
40,773

 
$
(2,580
)
 
$
38,193

Inventories and supplies
1,442

 
(316
)
 
1,126

Prepaid expenses and other current assets
1,005

 
(219
)
 
786

Property, plant and equipment
72,244

 

 
72,244

Permits and other intangibles
5,140

 

 
5,140

Current liabilities
(15,908
)
 
(2,717
)
 
(18,625
)
Closure and post-closure liabilities
(604
)
 
250

 
(354
)
Total identifiable net assets
104,092

 
(5,582
)
 
98,510

Goodwill
15,908

 
5,582

 
21,490

Total purchase price
$
120,000

 
$

 
$
120,000


The weighted average amortization period for the intangibles acquired is 8.2 years. The excess of the total purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible net assets and intangible assets acquired, was recorded as goodwill. The goodwill recognized is attributable to the expected operating synergies and growth potential that the Company expects to realize from this acquisition. Goodwill generated from the acquisition is deductible for tax purposes.

Pro forma revenue and earnings amounts on a combined basis as if these acquisitions had been completed on January 1, 2017 are immaterial to the consolidated financial statements of the Company since that date.

2017 Acquisitions
On July 14, 2017, the Company acquired Lonestar West Inc. ("Lonestar"), a public company headquartered in Alberta, Canada, for approximately CAD $41.8 million, ($33.1 million USD), net of cash acquired, which included an equity payout of CAD $0.72 per share to Lonestar shareholders and the assumption of approximately CAD $21.3 million ($16.8 million USD) in outstanding debt, which Clean Harbors subsequently repaid. The acquisition supports the Company's growth in the daylighting and hydro excavation services markets. In addition to increasing the size of the Company's hydro vac fleet, Lonestar's network of locations provides the Company with direct access to key geographic markets in both the United States and Canada. The acquired company is included in the Environmental Services segment. In connection with this acquisition, a goodwill amount of $2.8 million was recognized.
On January 31, 2017, the Company acquired a privately held company for a purchase price of approximately $11.9 million in cash, net of cash acquired. The acquired business produces and distributes oil products and therefore complements the Company's closed loop model as it relates to the sale of its oil products. The acquired company is included in the Safety-Kleen segment. In connection with this acquisition, a goodwill amount of $5.0 million was recognized.
Pro forma revenue and earnings amounts on a combined basis as if these acquisitions had been completed on January 1, 2017 are immaterial to the consolidated financial statements of the Company since that date.
(5) DISPOSITION OF BUSINESS
On June 30, 2017, the Company completed the sale of its Transformer Services business, as part of its continuous focus on improving or divesting certain non-core operations. The sale price was $45.5 million. The Transformer Services business was a non-core business previously included within the legacy Technical Services operating segment.


12


The following table presents income attributable to the Transformer Services business included in the Company's consolidated results of operations for the three and nine months ended September 30, 2017 (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2017
 
September 30, 2017
Income before provision for income taxes
$

 
$
2,771


(6) INVENTORIES AND SUPPLIES
Inventories and supplies consisted of the following (in thousands):
 
September 30, 2018
 
December 31, 2017
Oil and oil products
$
72,268

 
$
58,142

Supplies and drums
99,773

 
94,242

Solvent and solutions
9,200

 
9,167

Modular camp accommodations
1,657

 
1,826

Other
13,147

 
12,635

Total inventories and supplies
$
196,045

 
$
176,012

As of September 30, 2018 and December 31, 2017, other inventories consisted primarily of parts washer components, cleaning fluids, absorbents and automotive fluids, such as windshield washer fluid and antifreeze. Supplies and drums consisted primarily of drums and containers as well as critical spare parts to support the Company's incinerator and re-refinery operations.

(7) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
 
September 30, 2018
 
December 31, 2017
Land
$
125,804

 
$
121,658

Asset retirement costs (non-landfill)
14,857

 
14,593

Landfill assets
149,748

 
144,539

Buildings and improvements
443,908

 
414,384

Camp equipment
163,427

 
170,012

Vehicles
723,872

 
617,959

Equipment
1,697,920

 
1,644,102

Furniture and fixtures
5,652

 
5,708

Construction in progress
29,373

 
57,618

 
3,354,561

 
3,190,573

Less - accumulated depreciation and amortization
1,740,132

 
1,603,208

Total property, plant and equipment, net
$
1,614,429

 
$
1,587,365

Interest in the amount of $0.1 million and $0.5 million was capitalized to property, plant and equipment during the three and nine months ended September 30, 2018, respectively. Interest in the amount of $0.2 million and $0.4 million was capitalized to property, plant and equipment during the three and nine months ended September 30, 2017, respectively. Depreciation expense, inclusive of landfill amortization, was $64.9 million and $194.7 million for the three and nine months ended September 30, 2018, respectively. Depreciation expense, inclusive of landfill amortization, was $64.0 million and $189.2 million for the three and nine months ended September 30, 2017, respectively.


13


(8) GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in goodwill by segment for the nine months ended September 30, 2018 were as follows (in thousands):
 
Environmental Services
 
Safety-Kleen
 
Totals
Balance at January 1, 2018
$
172,386

 
$
306,137

 
$
478,523

Increase from current period acquisitions
33,281

 
4,168

 
37,449

Measurement period adjustments from prior period acquisitions
(78
)
 

 
(78
)
Foreign currency translation
(829
)
 
(963
)
 
(1,792
)
Balance at September 30, 2018
$
204,760

 
$
309,342

 
$
514,102

The Company assesses goodwill for impairment on an annual basis as of December 31, or at an interim date when events or changes in the business environment would more likely than not reduce the fair value of a reporting unit below its carrying value.
As discussed in Note 18, “Segment Reporting,” during the first quarter of fiscal year 2018 and as a result of operational and managerial changes in several of the Company’s businesses, the identification of operating segments in accordance with ASC 280, Segment Information, was changed. As a result of the Company's conclusions about the identification of operating segments, the Company also concluded that, for purposes of reviewing for potential goodwill impairment, it now has four reporting units, consisting of Environmental Sales and Service, Environmental Facilities, Kleen Performance Products and Safety-Kleen Environmental Services. The Company allocated goodwill to the newly identified reporting units using a relative fair value approach. In addition, the Company completed an assessment of any potential goodwill impairment for all reporting units immediately prior and subsequent to the reallocation and determined that no impairment existed.
As of September 30, 2018 and December 31, 2017, the Company's total finite-lived and indefinite-lived intangible assets consisted of the following (in thousands):
 
September 30, 2018
 
December 31, 2017
 
Cost
 
Accumulated
Amortization
 
Net
 
Cost
 
Accumulated
Amortization
 
Net
Permits
$
177,628

 
$
78,419

 
$
99,209

 
$
174,721

 
$
74,347

 
$
100,374

Customer and supplier relationships
400,292

 
178,506

 
221,786

 
399,224

 
158,972

 
240,252

Other intangible assets
37,844

 
31,412

 
6,432

 
36,766

 
31,592

 
5,174

Total amortizable permits and other intangible assets
615,764

 
288,337

 
327,427

 
610,711

 
264,911

 
345,800

Indefinite lived trademarks and trade names
123,928

 

 
123,928

 
123,328

 

 
123,328

Total permits and other intangible assets
$
739,692

 
$
288,337

 
$
451,355

 
$
734,039

 
$
264,911

 
$
469,128

Amortization expense of permits and other intangible assets was $8.1 million and $26.0 million in the three and nine months ended September 30, 2018, respectively. Amortization expense of permits and other intangible assets was $8.9 million and $27.7 million in the three and nine months ended September 30, 2017, respectively.
The expected amortization of the net carrying amount of finite-lived intangible assets at September 30, 2018 was as follows (in thousands):
Years Ending December 31,
Expected Amortization
2018 (three months)
$
8,481

2019
32,488

2020
30,137

2021
27,645

2022
27,476

Thereafter
201,200

 
$
327,427



14


(9) ACCRUED EXPENSES
Accrued expenses consisted of the following at September 30, 2018 and December 31, 2017 (in thousands):
 
September 30, 2018
 
December 31, 2017
Insurance
$
72,636

 
$
57,889

Interest
14,736

 
12,660

Accrued compensation and benefits
68,657

 
55,861

Income, real estate, sales and other taxes
37,307

 
27,330

Other
36,596

 
34,242

 
$
229,932

 
$
187,982

(10) CLOSURE AND POST-CLOSURE LIABILITIES
The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) from January 1, 2018 through September 30, 2018 were as follows (in thousands):
 
Landfill
Retirement
Liability
 
Non-Landfill
Retirement
Liability
 
Total
Balance at January 1, 2018
$
32,382

 
$
28,655

 
$
61,037

Liabilities assumed in acquisition

 
354

 
354

New asset retirement obligations
2,052

 

 
2,052

Accretion
1,898

 
1,897

 
3,795

Changes in estimates recorded to statement of operations

 
400

 
400

Changes in estimates recorded to balance sheet
871

 
64

 
935

Expenditures
(787
)
 
(269
)
 
(1,056
)
Currency translation and other
(79
)
 
(57
)
 
(136
)
Balance at September 30, 2018
$
36,337

 
$
31,044

 
$
67,381

All of the landfill facilities included in the above were active as of September 30, 2018. There were no significant charges (benefits) in 2018 resulting from changes in estimates for closure and post-closure liabilities.
New asset retirement obligations incurred during the first nine months of 2018 were discounted at the credit-adjusted risk-free rate of 5.66%.

(11) REMEDIAL LIABILITIES 
The changes to remedial liabilities for the nine months ended September 30, 2018 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, 2018
$
1,800

 
$
65,342

 
$
57,326

 
$
124,468

Accretion
64

 
2,074

 
1,395

 
3,533

Changes in estimates recorded to statement of operations

 
(56
)
 
(645
)
 
(701
)
Expenditures
(35
)
 
(2,911
)
 
(3,236
)
 
(6,182
)
Currency translation and other

 
892

 
(1,298
)
 
(406
)
Balance at September 30, 2018
$
1,829

 
$
65,341

 
$
53,542

 
$
120,712

In the nine months ended September 30, 2018, there were no significant charges (benefits) resulting from changes in estimates for remedial liabilities.


15


(12) FINANCING ARRANGEMENTS 
The following table is a summary of the Company’s financing arrangements (in thousands):
 
September 30, 2018
 
December 31, 2017
Senior secured Term Loan Agreement ("Term Loan Agreement")
$
7,535

 
$
4,000

Current portion of long-term obligations, at carrying value
$
7,535

 
$
4,000

 
 
 
 
Senior secured Term Loan Agreement due June 30, 2024
$
736,581

 
$
394,000

Senior unsecured notes, at 5.25%, due August 1, 2020 ("2020 Notes")

 
400,000

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

 
845,000

Revolving credit facility
50,000

 

Long-term obligations, at par
$
1,631,581

 
$
1,639,000

Unamortized debt issuance costs and premium, net
(15,425
)
 
(13,463
)
Long-term obligations, at carrying value
$
1,616,156

 
$
1,625,537

 
 
 
 
Total current and long-term obligations, at carrying value
$
1,623,691

 
$
1,629,537

   
Financing Activities
On April 17, 2018, the Company, and substantially all of the Company's domestic subsidiaries as guarantors, entered into the first amendment (“First Amendment”) of the Term Loan Agreement. The First Amendment reduced the applicable interest rate margin for the Company’s initial term loans (the "Term Loans") outstanding under the Term Loan Agreement by 25 basis points for both Eurocurrency borrowings and base rate borrowings. After giving effect to the repricing, the applicable interest rate margins for the Term Loans are 1.75% for Eurocurrency borrowings and 0.75% for base rate borrowings.
On July 19, 2018, the Company, and substantially all of the Company’s domestic subsidiaries as guarantors, entered into an Incremental Facility Amendment (the “Incremental Facility Amendment”) to the Company’s Term Loan Agreement. The Incremental Facility Amendment increased the principal amount of the Term Loans outstanding under the Term Loan Agreement by $350.0 million. Term Loans under the Term Loan Agreement will mature on June 30, 2024 and may be prepaid at any time without premium or penalty other than customary breakage costs with respect to Eurodollar based loans or if the Company engages in certain repricing transactions before January 19, 2019, in which event a 1.0% prepayment premium would be due. The Company’s obligations under the Term Loan Agreement are guaranteed by all of the Company’s domestic restricted subsidiaries and secured by liens on substantially all of the assets of the Company and the guarantors.
Concurrently with the closing on July 19, 2018 of the Incremental Facility Amendment, the Company purchased $322.0 million aggregate principal of the 2020 Notes. The total amount paid in purchasing the 2020 Notes was $330.9 million including $7.9 million of accrued interest. On August 1, 2018, the Company redeemed the remaining $78.0 million of outstanding 2020 Notes.
At September 30, 2018 and December 31, 2017, the fair value of the Term Loans was $746.0 million and $400.5 million, respectively, based on quoted market prices or other available market data. At September 30, 2018 and December 31, 2017, the fair value of the Company's 2021 Notes was $846.1 million and $855.7 million, respectively, based on quoted market prices for the instrument. The fair values of the Term Loans, 2020 Notes and 2021 Notes are considered Level 2 measures according to the fair value hierarchy.
The Company also maintains a $400.0 million revolving credit facility under which in connection with the redemption of the $78.0 million of 2020 Notes, the Company borrowed $50.0 million. At September 30, 2018, approximately $194.4 million was available to borrow and outstanding letters of credit were $130.0 million. At December 31, 2017, $217.8 million was available to borrow and outstanding letters of credit were $134.1 million.    

16


Cash Flow Hedge
The Company’s strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements to hedge against adverse movements in interest rates. For interest rate derivatives deemed to be effective cash flow hedges, the change in fair value is recorded in stockholders’ equity as a component of accumulated other comprehensive loss and included in interest expense at the same time as interest expense is affected by the hedged transaction. Differences paid or received over the life of the agreements are recorded as additions to or reductions of interest expense on the underlying debt.
Although the interest rate on all $744.1 million aggregate principal amount of Term Loans which were outstanding on September 30, 2018 is variable under the Term Loan Agreement, the Company has effectively fixed the interest rate on the first $350.0 million aggregate principal amount of the Term Loans outstanding by entering into interest rate swap agreements with a notional amount of $350.0 million. Under the terms of the interest rate swap agreements, the Company receives interest based on the 1-month LIBOR index and pays interest at a weighted average rate of approximately 2.92%. When combined with the 1.75% interest rate margin for Eurocurrency borrowings, the effective annual interest rate on such $350.0 million aggregate principal amount of Term Loans is therefore approximately 4.67%
The Company recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value. No ineffectiveness has been identified on these swaps and, therefore, all unrealized changes in fair value are recorded in accumulated other comprehensive loss. Amounts are reclassified from accumulated other comprehensive loss into interest expense on the Statement of Operations in the same period or periods during which the hedged transaction affects earnings.
As of September 30, 2018, we have recorded a derivative liability with a fair value of $0.3 million within accrued expenses in connection with these cash flow hedges.
The fair value of the interest rate swaps included in the Level 2 tier of the fair value hierarchy is calculated using discounted cash flow valuation methodologies based upon the one month LIBOR yield curves that are observable at commonly quoted intervals for the full term of the swaps.
(13) EARNINGS PER SHARE     
The following are computations of basic and diluted earnings per share (in thousands except for per share amounts):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Numerator for basic and diluted earnings per share:
 

 
 

 
 
 
 
Net income
$
31,089

 
$
12,058

 
$
49,205

 
$
16,545

 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Basic shares outstanding
56,059

 
57,033

 
56,222

 
57,149

Dilutive effect of equity-based compensation awards
232

 
162

 
138

 
131

Dilutive shares outstanding
56,291

 
57,195

 
56,360

 
57,280

 
 
 
 
 
 
 
 
Basic income per share:
$
0.55

 
$
0.21

 
$
0.88

 
$
0.29

 
 

 
 

 
 

 
 

Diluted income per share:
$
0.55

 
$
0.21

 
$
0.87

 
$
0.29

For the three months ended September 30, 2018 and September 30, 2017, the dilutive effect of all then outstanding restricted stock and performance awards is included in the EPS calculation above except for 304,644 and 301,300, respectively, of performance stock awards for which the performance criteria were not attained at that time and 6,565 and 3,724, respectively, of restricted stock awards which were antidilutive at that time.
For the nine months ended September 30, 2018 and September 30, 2017, the dilutive effect of all then outstanding restricted stock and performance awards is included in the EPS calculation above except for 304,644 and 301,300, respectively, of performance stock awards for which the performance criteria were not attained at that time and 91,743 and 19,485, respectively, of restricted stock awards which were antidilutive at that time.

17


(14) ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component and related tax effects for the nine months ended September 30, 2018 were as follows (in thousands):    
 
Foreign Currency Translation
 
Unrealized Losses on Available-For-Sale Securities
 
Unrealized Loss on Interest Rate Hedge
 
Unfunded Pension Liability
 
Total
Balance at January 1, 2018
$
(170,575
)
 
$
(146
)
 
$

 
$
(1,686
)
 
$
(172,407
)
Other comprehensive loss before tax effects
(17,259
)
 
(1,043
)
 
(310
)
 

 
(18,612
)
Tax effects
5,609

 
(95
)
 

 

 
5,514

Other comprehensive loss
$
(11,650
)
 
$
(1,138
)
 
$
(310
)
 
$

 
$
(13,098
)
Balance at September 30, 2018
$
(182,225
)
 
$
(1,284
)
 
$
(310
)
 
$
(1,686
)
 
$
(185,505
)
(15) STOCK-BASED COMPENSATION
Total stock-based compensation cost charged to selling, general and administrative expenses for the three and nine months ended September 30, 2018 was $4.1 million and $10.7 million, respectively. Total stock-based compensation cost charged to selling, general and administrative expenses for the three and nine months ended September 30, 2017 was $4.0 million and $9.2 million, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $0.8 million and $2.0 million for the three and nine months ended September 30, 2018, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $1.2 million and $2.7 million for the three and nine months ended September 30, 2017, 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, 2018:
Restricted Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2018
604,933

 
$
54.23

Granted
308,016

 
$
54.39

Vested
(172,946
)
 
$
54.61

Forfeited
(41,244
)
 
$
54.04

Balance at September 30, 2018
698,759

 
$
54.22

    
As of September 30, 2018, there was $28.5 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 2.6 years. The total fair value of restricted stock vested during the three and nine months ended September 30, 2018 was $1.1 million and $9.4 million, respectively. The total fair value of restricted stock vested during the three and nine months ended September 30, 2017 was $0.5 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, Adjusted Free Cash Flow and Total Recordable Incident Rate. In addition, performance stock awards include continued service conditions. The fair value of each performance stock award is based on the

18


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, 2018:
Performance Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2018
190,129

 
$
55.63

Granted
171,584

 
$
55.71

Vested
(8,696
)
 
$
54.26

Forfeited
(27,181
)
 
$
55.43

Balance at September 30, 2018
325,836

 
$
55.73


As of September 30, 2018, there was $2.1 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, 2018. The total fair value of performance awards vested during the nine months ended September 30, 2018 was $0.5 million. No performance awards vested during the three months ended September 30, 2017. The total fair value of performance awards vested during the nine months ended September 30, 2017 was $1.4 million.

Common Stock Repurchases
On October 31, 2017, the Company's board of directors increased the size of the Company’s current share repurchase program from $300 million to $600 million. During the three and nine months ended September 30, 2018, the Company repurchased and retired a total of 0.1 million shares and 0.6 million shares, respectively, of the Company's common stock for a total cost of $7.1 million and $33.6 million, respectively. During the three and nine months ended September 30, 2017, the Company repurchased and retired a total of 0.2 million and 0.5 million, respectively, of the Company's common stock for a total cost of $12.2 million and $24.5 million, respectively. Through September 30, 2018, the Company has repurchased and retired a total of 5.4 million shares of the Company's common stock for a total cost of $282.4 million under this program. As of September 30, 2018, an additional $317.6 million remained available for repurchase of shares under the current authorized program.

(16) COMMITMENTS AND CONTINGENCIES
Legal and Administrative Proceedings
The Company and its subsidiaries are subject to legal proceedings and claims arising in the ordinary course of business. Actions filed against the Company arise from commercial and employment-related claims including alleged class actions related to sales practices and wage and hour claims. The plaintiffs in these actions may be seeking damages or injunctive relief or both. These actions are in various jurisdictions and stages of proceedings, and some are covered in part by insurance. In addition, the Company’s waste management services operations are regulated by federal, state, provincial and local laws enacted to regulate discharge of materials into the environment, remediation of contaminated soil and groundwater or otherwise protect the environment. This ongoing regulation results in the Company frequently becoming a party to legal or administrative proceedings involving all levels of governmental authorities and other interested parties. The issues involved in such proceedings generally relate to alleged violations of existing permits and licenses or alleged responsibility under federal or state Superfund laws to remediate contamination at properties owned either by the Company or by other parties (“third party sites”) to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes.
At September 30, 2018 and December 31, 2017, the Company had recorded reserves of $21.8 million and $19.3 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, 2018 and December 31, 2017, the Company also believed that it was reasonably possible that the amount of these potential liabilities could be as much as $1.7 million and $1.8 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, 2018 and December 31, 2017, the $21.8 million and $19.3 million, respectively, of reserves consisted of (i) $17.0 million and $17.9 million, respectively, related to pending legal or administrative proceedings, including Superfund liabilities, which were included in remedial liabilities on the consolidated balance sheets, and (ii) $4.8 million and $1.4 million, respectively, primarily related to federal, state and provincial enforcement actions, which were included in accrued expenses on the consolidated balance sheets.

19


As of September 30, 2018, the principal legal and administrative proceedings in which the Company was involved, or which had been terminated during 2018, 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 (CAD) in general damages and $10.0 million (CAD) in punitive damages, plus interest and costs, as well as injunctive relief. Both the Government of Quebec and the Company have filed summary judgment motions against the municipalities. The parties are 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 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, 2018 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 63 proceedings (excluding cases which have been settled but not formally dismissed) as of September 30, 2018, wherein persons claim personal injury resulting from the use of Safety-Kleen's parts cleaning equipment or cleaning products. These proceedings typically involve allegations that the solvent used in Safety-Kleen's parts cleaning equipment contains contaminants and/or that Safety-Kleen's recycling process does not effectively remove the contaminants that become entrained in the solvent during their use. In addition, certain claimants assert that Safety-Kleen failed to warn adequately the product user of potential risks, including a historic failure to warn that solvent contains trace amounts of toxic or hazardous substances such as benzene.
Safety-Kleen maintains insurance that it believes will provide coverage for these 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, 2018. From January 1, 2018 to September 30, 2018, six 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 indemnification obligations have been identified as potentially responsible parties ("PRPs") or potential PRPs in connection with 128 sites which are subject to or are proposed to become subject to proceedings under federal or state Superfund laws. Of the 128 sites, five (including the BR Facility described below) involve facilities that are now owned or leased by the Company and 123 involve third party sites to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes. Of the 123 third party sites, 30 are now settled, 16 are currently requiring expenditures on remediation and 77 are not currently requiring expenditures on remediation.
In connection with each site, the Company has estimated the extent, if any, to which it may be subject, either directly or as a result of any indemnification obligations, for cleanup and remediation costs, related legal and consulting costs associated with PRP investigations, settlements, and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability (if any) of the Company

20


or the prior owners of certain of the Company's facilities to contribute a portion of the cleanup costs, the assumptions that must be made in calculating the estimated cost and timing of remediation, the identification of other PRPs and their respective capability and obligation to contribute to remediation efforts, and the existence and legal standing of indemnification agreements (if any) with prior owners, which may either benefit the Company or subject the Company to potential indemnification obligations. The Company believes its potential liability could exceed $100,000 at 10 of the 123 third party sites.
BR Facility.    The Company acquired in 2002 a former hazardous waste incinerator and landfill in Baton Rouge (the "BR Facility"), for which operations had been previously discontinued by the prior owner. In September 2007, the Environmental Protection Agency (the "EPA") issued a special notice letter to the Company related to the Devil's Swamp Lake Site ("Devil's Swamp") in East Baton Rouge Parish, Louisiana. Devil's Swamp includes a lake located downstream of an outfall ditch where wastewater and storm water have been discharged, and Devil's Swamp is proposed to be included on the National Priorities List due to the presence of Contaminants of Concern ("COC") cited by the EPA. These COCs include substances of the kind found in wastewater and storm water discharged from the BR Facility in past operations. The EPA originally requested COC generators to submit a good faith offer to conduct a remedial investigation feasibility study directed towards the eventual remediation of the site. The Company has completed performing corrective actions at the BR Facility under an order issued by the Louisiana Department of Environmental Quality, and has also completed conducting the remedial investigation and feasibility study for Devil's Swamp under an order issued by the EPA. The Company cannot presently estimate the potential additional liability for the Devil's Swamp cleanup until a final remedy is selected by the EPA with issuance of a Record of Decision.
Third Party Sites.    Of the 123 third party sites at which the Company has been notified it is a PRP or potential PRP or may have indemnification obligations, Clean Harbors has an indemnification agreement at 11 of these sites with ChemWaste, a former subsidiary of Waste Management, Inc., and at six additional of these third party sites, Safety-Kleen has a similar indemnification agreement with McKesson Corporation. These agreements indemnify the Company (which now includes Safety-Kleen) with respect to any liability at the 17 sites for waste disposed prior to the Company's (or Safety-Kleen's) acquisition of the former subsidiaries of Waste Management and McKesson which had shipped wastes to those sites. Accordingly, Waste Management or McKesson are paying all costs of defending those subsidiaries in those 17 cases, including legal fees and settlement costs. However, there can be no guarantee that the Company's ultimate liabilities for those sites will not exceed the amount recorded or that indemnities applicable to any of these sites will be available to pay all or a portion of related costs. Except for the indemnification agreements which the Company holds from ChemWaste, McKesson and one other entity, the Company does not have an indemnity agreement with respect to any of the 123 third party sites discussed above.
Federal, State and Provincial Enforcement Actions
From time to time, the Company pays fines or penalties in regulatory proceedings relating primarily to waste treatment, storage or disposal facilities. As of September 30, 2018 and December 31, 2017, there were six and five, respectively, proceedings for which the Company reasonably believes that the sanctions could equal or exceed $100,000. The Company believes that the fines or other penalties in these or any of the other regulatory proceedings will, individually or in the aggregate, not have a material effect on its financial condition, results of operations or cash flows.

(17) 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 nine months ended September 30, 2018 was 26.6% and 36.3% compared to 51.0% and 69.9% for the same periods in 2017. The decrease in the effective tax rate for the three months ended September 30, 2018 was primarily attributable to a lower federal tax rate, a decrease in unrecognized tax benefits and the recording of tax benefits for prior period returns recorded as a discrete item in the quarter. The variations in the effective income tax rates for the nine months ended September 30, 2018 and the three and nine months ended September 30, 2017, as compared to more customary relationships between pre-tax income and the provision for income taxes, were primarily due to not recognizing income tax benefits from current operating losses related to certain Canadian entities during these periods.
On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Tax Act”) was signed into law, making significant changes to the federal tax law. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial tax

21


system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company recognized its best estimate of the income tax effects of the 2017 Tax Act in the financial statements included in its 2017 Annual Report on Form 10-K in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC Topic 740, Income Taxes, in the reporting period in which the 2017 Tax Act was signed into law. During the three and nine months ended September 30, 2018, the Company did not recognize any changes to the provisional amounts recorded in its 2017 Annual Report on Form 10-K in connection with the 2017 Tax Act. The Company is continuing to evaluate the impact of the Tax Act on its business and the consolidated financial statements and will make any adjustments to its provisional amounts in subsequent reporting periods upon obtaining, preparing or analyzing additional information affecting the income tax effects initially reported as a provisional amount. Any subsequent adjustment to these amounts will be recorded to tax expense in the fourth quarter of 2018 when the analysis will be completed, but the adjustment (if any) is not expected to be material.
As of September 30, 2018 and December 31, 2017, the Company had recorded $4.2 million and $5.1 million, respectively, of liabilities for unrecognized tax benefits and $0.8 million and $0.9 million of interest, respectively. The net decrease to the liability of $0.9 was related to the release of unrecognized tax benefits due to expiring statute of limitations.
Due to expiring statute of limitation periods, the Company believes that total unrecognized tax benefits will decrease by $0.6 million within the next 12 months.

(18) SEGMENT REPORTING 
Segment reporting is prepared on the same basis that the Company's chief executive officer, who is the Company's chief operating decision maker, manages the business, makes operating decisions and assesses performance. During the first quarter of fiscal year 2018, certain of the Company's businesses undertook a reorganization which included changes to the underlying business and management structures. The reorganization resulted in combining the Environmental Services businesses from an operational and management perspective and is expected to deepen customer relationships and allow for efficiencies across the Company's operations through the sharing of resources, namely labor and equipment which will reduce third party spend and promote the cross selling of such business offerings. In connection with this reorganization, the Company’s chief operating decision maker also requested changes in the information that he regularly reviews for purposes of allocating resources and assessing performance. These changes required a reconsideration of the Company’s operating segments in the first quarter of 2018 and resulted in a change in the Company’s assessment of its operating segments. Upon reconsideration of the identification of the Company’s operating segments, the Company concluded that there are now two operating segments for disclosure in accordance with ASC 280 Segment reporting; (i) the Environmental Services segment which consists of the Company’s historical Technical Services, Industrial Services, Field Services and Oil, Gas and Lodging businesses and (ii) the Safety-Kleen segment.
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 operating segments described above are recorded as “Corporate Items.” Corporate Items revenues consist of two different operations for which the revenues are insignificant. Corporate Items cost of revenues represents certain central services that are not allocated to the Company's operating 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 operating segments.  
The following table reconciles third party revenues to direct revenues for the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
For the Three Months Ended September 30, 2018
 
For the Three Months Ended September 30, 2017
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
Environmental Services
$
508,813

 
$
33,022

 
$
1,145

 
$
542,980

 
$
440,163

 
$
31,757

 
$
761

 
$
472,681

Safety-Kleen
333,901

 
(33,022
)
 
6

 
300,885

 
315,028

 
(31,757
)
 
3

 
283,274

Corporate Items
467

 

 
(1,151
)
 
(684
)
 
655

 

 
(764
)
 
(109
)
Total
$
843,181

 
$

 
$

 
$
843,181

 
$
755,846

 
$

 
$

 
$
755,846


22


 
For the Nine Months Ended September 30, 2018
 
For the Nine Months Ended September 30, 2017
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
Environmental Services
$
1,468,417

 
$
99,278

 
$
2,546

 
$
1,570,241

 
$
1,285,701

 
$
95,465

 
$
2,001

 
$
1,383,167

Safety-Kleen
972,534

 
(99,278
)
 
28

 
873,284

 
910,885

 
(95,465
)
 
4

 
815,424

Corporate Items
1,148

 

 
(2,574
)
 
(1,426
)
 
989

 

 
(2,005
)
 
(1,016
)
Total
$
2,442,099

 
$

 
$

 
$
2,442,099

 
$
2,197,575

 
$

 
$

 
$
2,197,575

The primary financial measure by which the Company evaluates the performance of its segments is "Adjusted EBITDA" which consists of net income plus accretion of environmental liabilities, depreciation and amortization, interest expense, net, loss on early extinguishment of debt, provision for income taxes and excludes loss (gain) on sale of business and other expense, net. Transactions between the segments are accounted for at the Company’s best estimate based on similar transactions with outside customers.
The following table presents Adjusted EBITDA information used by management by reported segment (in thousands):
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Adjusted EBITDA:
 

 
 

 
 
 
 
Environmental Services
$
102,419

 
$
86,505

 
$
273,035

 
$
241,527

Safety-Kleen
79,502

 
70,305

 
214,455

 
182,954

Corporate Items
(40,644
)
 
(33,811
)
 
(118,387
)
 
(100,656
)
Total
$
141,277

 
$
122,999

 
$
369,103

 
$
323,825

Reconciliation to Consolidated Statements of Operations:
 

 
 

 
 
 
 
Accretion of environmental liabilities
2,450

 
2,347

 
7,328

 
7,053

Depreciation and amortization
73,082

 
72,989

 
220,686

 
216,932

Income from operations
65,745

 
47,663

 
141,089

 
99,840

Other expense, net
996

 
432

 
449

 
2,814

Loss on early extinguishment of debt
2,469

 
1,846

 
2,469

 
7,891

Loss (gain) on sale of business

 
77

 

 
(31,645
)
Interest expense, net of interest income
19,916

 
20,675

 
60,955

 
65,743

Income before provision for income taxes
$
42,364

 
$
24,633