CLEAN HARBORS INC [CLH] Filings

10-Q 1 clh-20230930.htm 10-Q clh-20230930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED

SEPTEMBER 30, 2023

☐

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

02061-9149

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s Telephone Number, Including area code: (781) 792-5000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value

CLH

New York Stock Exchange

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 ☒ No ☐

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 ☒ No ☐

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

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

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

The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at October 27, 2023 was 54,086,261.

CLEAN HARBORS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


			Page No.

PART I: FINANCIAL INFORMATION

ITEM 1: Unaudited Financial Statements
Consolidated Balance Sheets			1
Unaudited Consolidated Statements of Operations			2
Unaudited Consolidated Statements of Comprehensive Income			3
Unaudited Consolidated Statements of Cash Flows			4
Unaudited Consolidated Statements of Stockholders’ Equity			5
Notes to Unaudited Consolidated Financial Statements			7

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			23

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk			34

ITEM 4: Controls and Procedures			34

PART II: OTHER INFORMATION

ITEM 1: Legal Proceedings			36
ITEM 1A: Risk Factors			36
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds			36
ITEM 3: Defaults Upon Senior Securities			36
ITEM 4: Mine Safety Disclosures			36
ITEM 5: Other Information			36
ITEM 6: Exhibits			37
Signatures			38

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CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)


	September 30, 2023		December 31, 2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	335,965	$	492,603
Short-term marketable securities	84,007		62,033
Accounts receivable, net of allowances aggregating $42,342 and $45,253, respectively	1,010,335		964,603
Unbilled accounts receivable	130,888		107,010
Inventories and supplies	311,512		324,994
Prepaid expenses and other current assets	78,045		82,518
Total current assets	1,950,752		2,033,761
Property, plant and equipment, net	2,128,508		1,980,302
Other assets:
Operating lease right-of-use assets	188,695		166,181
Goodwill	1,286,473		1,246,878
Permits and other intangibles, net	613,540		620,782
Other	80,211		81,803
Total other assets	2,168,919		2,115,644
Total assets	$	6,248,179	$	6,129,707

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	10,000	$	10,000
Accounts payable	414,963		446,629
Deferred revenue	102,468		94,094
Accrued expenses and other current liabilities	369,097		396,716
Current portion of closure, post-closure and remedial liabilities	21,759		23,123
Current portion of operating lease liabilities	57,100		49,532
Total current liabilities	975,387		1,020,094
Other liabilities:
Closure and post-closure liabilities, less current portion of $11,425 and $13,205, respectively	108,466		105,596
Remedial liabilities, less current portion of $10,334 and $9,918, respectively	101,370		106,372
Long-term debt, less current portion	2,292,952		2,414,828
Operating lease liabilities, less current portion	133,163		119,259
Deferred tax liabilities	347,628		350,389
Other long-term liabilities	103,419		90,847
Total other liabilities	3,086,998		3,187,291
Commitments and contingent liabilities (See Note 16)
Stockholders’ equity:
Common stock, $0.01 par value:
Authorized 80,000,000 shares; issued and outstanding 54,102,982 and 54,064,797 shares, respectively	541		541

Additional paid-in capital	490,163		504,240
Accumulated other comprehensive loss	(169,139)		(167,181)
Accumulated earnings	1,864,229		1,584,722
Total stockholders’ equity	2,185,794		1,922,322
Total liabilities and stockholders’ equity	$	6,248,179	$	6,129,707

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,
	2023		2022		2023		2022
Revenues:
Service revenues	$	1,129,216	$	1,073,810	$	3,341,539	$	3,100,914
Product revenues	236,480		289,276		729,444		787,593
Total revenues	1,365,696		1,363,086		4,070,983		3,888,507
Cost of revenues: (exclusive of items shown separately below)
Service revenues	765,004		738,041		2,288,199		2,168,025
Product revenues	178,947		172,607		534,778		484,481
Total cost of revenues	943,951		910,648		2,822,977		2,652,506
Selling, general and administrative expenses	171,019		151,711		505,154		458,492
Accretion of environmental liabilities	3,388		3,246		10,281		9,599
Depreciation and amortization	92,970		88,394		267,425		260,560

Income from operations	154,368		209,087		465,146		507,350
Other income (expense), net	334		104		(833)		2,073
Loss on early extinguishment of debt	—		—		(2,362)		—
Gain on sale of business	—		—		—		8,864
Interest expense, net of interest income of $2,877, $1,103, $7,833 and $2,159, respectively	(29,696)		(28,081)		(80,400)		(79,354)
Income before provision for income taxes	125,006		181,110		381,551		438,933
Provision for income taxes	33,666		45,311		102,044		109,663
Net income	$	91,340	$	135,799	$	279,507	$	329,270
Earnings per share:
Basic	$	1.69	$	2.51	$	5.17	$	6.07
Diluted	$	1.68	$	2.50	$	5.14	$	6.04
Shares used to compute earnings per share - Basic	54,122		54,111		54,097		54,278
Shares used to compute earnings per share - Diluted	54,419		54,381		54,411		54,542

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

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net income	$	91,340	$	135,799	$	279,507	$	329,270
Other comprehensive (loss) income, net of tax:
Unrealized gain (loss) on available-for-sale securities	93		(36)		311		(692)

Unrealized gain on fair value of interest rate hedges	7,801		23,750		15,528		59,674
Reclassification adjustment for interest rate hedge amounts realized in net income	(3,650)		(1,296)		(12,704)		4,062
Reclassification adjustment for settlement of interest rate hedges	—		—		(5,905)		—
Unfunded pension liability	6		40		(1)		50
Foreign currency translation adjustments	(7,423)		(31,323)		813		(38,649)
Other comprehensive (loss) income, net of tax	(3,173)		(8,865)		(1,958)		24,445
Comprehensive income	$	88,167	$	126,934	$	277,549	$	353,715

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

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Nine Months Ended
	September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	279,507	$	329,270
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	267,425		260,560
Allowance for doubtful accounts	2,620		6,684
Amortization of deferred financing costs and debt discount	4,036		4,734
Accretion of environmental liabilities	10,281		9,599
Changes in environmental liability estimates	3,258		2,105
Deferred income taxes	(356)		2,226
Other expense (income), net	833		(2,073)
Stock-based compensation	14,809		20,375
Loss on early extinguishment of debt	2,362		—
Gain on sale of business	—		(8,864)
Environmental expenditures	(24,064)		(9,720)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable and unbilled accounts receivable	(46,445)		(293,562)
Inventories and supplies	12,691		(44,324)
Other current and non-current assets	(18,190)		(12,600)
Accounts payable	(40,013)		52,979
Other current and long-term liabilities	(13,062)		40,153
Net cash from operating activities	455,692		357,542
Cash flows used in investing activities:
Additions to property, plant and equipment	(311,906)		(244,547)
Proceeds from sale and disposal of fixed assets	5,129		5,118
Acquisitions, net of cash acquired	(119,596)		(73,568)
Proceeds from sale of business, net of transaction costs	750		16,811
Additions to intangible assets including costs to obtain or renew permits	(1,507)		(1,094)
Purchases of available-for-sale securities	(104,329)		(36,418)
Proceeds from sale of available-for-sale securities	84,390		51,736
Net cash used in investing activities	(447,069)		(281,962)
Cash flows used in financing activities:
Change in uncashed checks	3,004		887
Tax payments related to withholdings on vested restricted stock	(10,886)		(6,214)
Repurchases of common stock	(18,000)		(44,182)
Deferred financing costs paid	(6,371)		(410)

Payments on finance leases	(11,594)		(9,538)
Principal payments on debt	(621,475)		(13,152)
Proceeds from issuance of debt	500,000		—
Borrowing from revolving credit facility	114,000		—
Payment on revolving credit facility	(114,000)		—
Net cash used in financing activities	(165,322)		(72,609)
Effect of exchange rate change on cash	61		(6,523)
Decrease in cash and cash equivalents	(156,638)		(3,552)
Cash and cash equivalents, beginning of period	492,603		452,575
Cash and cash equivalents, end of period	$	335,965	$	449,023
Supplemental information:
Cash payments for interest and income taxes:
Interest paid	$	100,813	$	86,407
Income taxes paid, net of refunds	107,328		53,183
Non-cash investing activities:
Property, plant and equipment accrued	29,127		23,726
Remedial liability assumed in acquisition of property, plant and equipment	—		8,092
ROU assets obtained in exchange for operating lease liabilities	61,741		39,899
ROU assets obtained in exchange for finance lease liabilities	26,317		11,263

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

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)


	Common Stock						Accumulated Other Comprehensive Loss
	Number of Shares	$0.01 Par Value		Additional Paid-in Capital					Accumulated Earnings			Total Stockholders’ Equity
Balance at January 1, 2023	54,065	$	541		$	504,240	$	(167,181)		$	1,584,722		$	1,922,322
Net income	—	—			—		—			72,401			72,401
Other comprehensive loss	—	—			—		(14,346)			—			(14,346)
Stock-based compensation	—	—			6,018		—			—			6,018
Issuance of common stock for restricted share vesting, net of employee tax withholdings	49	—			(3,351)		—			—			(3,351)
Repurchases of common stock	(22)	—			(3,000)		—			—			(3,000)
Balance at March 31, 2023	54,092	541			503,907		(181,527)			1,657,123			1,980,044
Net income	—	—			—		—			115,766			115,766
Other comprehensive income	—	—			—		15,561			—			15,561
Stock-based compensation	—	—			4,500		—			—			4,500
Issuance of common stock for restricted share vesting, net of employee tax withholdings	34	—			(984)		—			—			(984)
Repurchases of common stock	(36)	—			(5,001)		—			—			(5,001)
Balance at June 30, 2023	54,090	541			502,422		(165,966)			1,772,889			2,109,886
Net income	—	—			—		—			91,340			91,340
Other comprehensive loss	—	—			—		(3,173)			—			(3,173)
Stock-based compensation	—	—			4,291		—			—			4,291
Issuance of common stock for restricted share vesting, net of employee tax withholdings	71	1			(6,552)		—			—			(6,551)
Repurchases of common stock	(58)	(1)			(9,998)		—			—			(9,999)






Balance at September 30, 2023	54,103	$	541		$	490,163	$	(169,139)		$	1,864,229		$	2,185,794

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(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, 2022	54,419	$	544		$	536,377	$	(196,012)		$	1,172,978		$	1,513,887

Net income	—	—			—		—			45,314			45,314
Other comprehensive income	—	—			—		33,849			—			33,849
Stock-based compensation	—	—			5,712		—			—			5,712
Issuance of common stock for restricted share vesting, net of employee tax withholdings	36	—			(1,831)		—			—			(1,831)
Repurchases of common stock	(41)	—			(3,694)		—			—			(3,694)
Balance at March 31, 2022	54,414	544			536,564		(162,163)			1,218,292			1,593,237

Net income	—	—			—		—			148,157			148,157
Other comprehensive loss	—	—			—		(539)			—			(539)
Stock-based compensation	—	—			6,835		—			—			6,835
Issuance of common stock for restricted share vesting, net of employee tax withholdings	31	—			(740)		—			—			(740)
Repurchases of common stock	(335)	(3)			(29,997)		—			—			(30,000)
Balance at June 30, 2022	54,110	541			512,662		(162,702)			1,366,449			1,716,950
Net income	—	—			—		—			135,799			135,799
Other comprehensive loss	—	—			—		(8,865)			—			(8,865)
Stock-based compensation	—	—			7,828		—			—			7,828
Issuance of common stock for restricted share vesting, net of employee tax withholdings	68	1			(3,644)		—			—			(3,643)
Repurchases of common stock	(108)	(1)			(10,487)		—			—			(10,488)






Balance at September 30, 2022	54,070	$	541		$	506,359	$	(171,567)		$	1,502,248		$	1,837,581

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

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CLEAN HARBORS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

The accompanying consolidated interim financial statements are unaudited and include the accounts of Clean Harbors, Inc. and its subsidiaries (collectively, “Clean Harbors” or the “Company”) and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, include all adjustments which are of a normal recurring nature and are 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 conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

(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, 2022. There have been no material changes in these policies or their application except for the change described below.

Segment Reporting and Goodwill

Pursuant to the previous succession announcement, effective March 31, 2023, Michael L. Battles and Eric W. Gerstenberg, former Chief Financial Officer and Chief Operating Officer of the Company, respectively, were appointed Co-CEOs. As a result, the Company’s new Chief Operating Decision Maker (“CODM”) is a committee comprised of both Co-CEOs, who, going forward, will manage the business, make operating decisions and assess performance. The Company does not expect that the new CODM structure will change how the Company is managed and as such will continue to report as two operating segments; (i) the Environmental Services segment and (ii) the Safety-Kleen Sustainability Solutions segment and assess the recoverability of goodwill under three reporting units; (i) Environmental Sales and Service, (ii) Environmental Facilities and (iii) Safety-Kleen Sustainability Solutions.

(3) REVENUES

The Company generates revenues through the following operating segments: Environmental Services and Safety-Kleen Sustainability Solutions. The Company's Environmental Services operating segment generally has four sources of revenue and the Safety-Kleen Sustainability Solutions operating segment has two sources of revenue. The Company disaggregates third-party revenues by geographic location and source of revenue as management believes these categories depict how revenue and cash flows are affected by economic factors. The Company's significant sources of revenue include:

Technical Services—Technical Services contribute to the revenues of the Environmental Services operating segment. Revenues for these services 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 and large remediation projects. 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, material and personnel costs as well as transportation and other fees. Collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the services 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 as a basis for measuring the satisfaction of the performance obligation. Revenues for treatment and disposal of waste are recognized upon completion of treatment, final disposition in a landfill or incinerator, 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 the relative standalone selling price (i.e., the estimated price that a customer would pay for the services on a standalone basis). Revenues and the related costs from waste that is not yet completely processed and disposed of are deferred. The deferred revenues and costs are recognized when the services are completed. The period between collection and transportation and the final processing and disposal ranges depending on the location of the customer, but generally is measured in days.

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Industrial Services and Other—Industrial Services contribute to the revenues of the Environmental Services operating segment. These revenues are primarily generated from industrial and specialty services provided to refineries, chemical plants, manufacturing facilities, power generation companies, pulp and paper mills, mines and other industrial customers throughout North America. Services include in-plant cleaning and maintenance services, plant outage and turnaround services, specialty cleaning services including chemical cleaning, pigging and high and ultra-high pressure water cleaning, leak detection and repair, daylighting, production services and upstream energy services. 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 services 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.

Field and Emergency Response Services—Field and Emergency Response Services contribute to the revenues of the Environmental Services operating segment. Field Services revenues are generated from cleanup services at customer sites, including those managed by municipalities and utility providers, or other locations on a scheduled or emergency response basis. Services include confined space entry for tank cleaning, site decontamination, remediation, railcar cleaning, manhole/vault clean outs, product recovery and transfer and vacuum services. Additional services include filtration and water treatment services. Response services for environmental emergencies of any scale range from man-made disasters such as oil spills to natural disasters like hurricanes. Emergency response services also include spill cleanup on land and water, as well as contagion disinfection, decontamination and disposal services. Field and emergency response 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 services 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.

Safety-Kleen Environmental Services—Safety-Kleen Environmental Services revenues contribute both to the Environmental Services operating segment and the Safety-Kleen Sustainability Solutions operating segment depending upon the nature of such revenues and operating responsibilities relative to executing the revenue contracts. Revenues from providing containerized waste handling and disposal services, parts washer services and vacuum services, referred to collectively as the Safety-Kleen branches' core service offerings, contribute to the revenues of the Environmental Services operating segment. In addition, sales of packaged blended oil products and other complementary product sales contribute to the revenues of the Environmental Services operating segment. Revenues generated from waste oil, anti-freeze and oil filter collection services, sales of bulk blended oil products and sales of bulk automotive fluids contribute to the Safety-Kleen Sustainability Solutions operating segment.

Generally, the revenue from services is recognized over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The duration of such services can be over a number of hours or several days. 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 whereby control transfers when the products are delivered to the customer. Containerized waste services consist of profiling, collecting, transporting and recycling or disposing of a wide variety of waste. Related collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. Parts washer services include customer use of the Company's parts washer equipment, cleaning and maintenance of the parts washer equipment and removal and replacement of 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 services.

Safety-Kleen Oil—Safety-Kleen Oil related sales contribute to the revenues of the Safety-Kleen Sustainability Solutions segment. These 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 and pulp and paper companies. The used oil is also processed into vacuum gas oil which can be further re-refined into lubricant base oils or sold directly into the marine diesel oil fuel market. 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.

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The following tables present the Company's third-party revenue disaggregated by source of revenue and geography (in thousands):


	For the Three Months Ended September 30, 2023
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	1,017,224	$	206,860	$	112	$	1,224,196
Canada	118,055		23,445		—		141,500
Total third-party revenues	$	1,135,279	$	230,305	$	112	$	1,365,696

Sources of Revenue
Technical Services	$	403,889	$	—	$	—	$	403,889
Industrial Services and Other	350,251		—		112		350,363
Field and Emergency Response Services	155,046		—		—		155,046
Safety-Kleen Environmental Services	226,093		59,458		—		285,551
Safety-Kleen Oil	—		170,847		—		170,847
Total third-party revenues	$	1,135,279	$	230,305	$	112	$	1,365,696


	For the Three Months Ended September 30, 2022
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	960,737	$	249,035	$	283	$	1,210,055
Canada	119,295		33,736		—		153,031
Total third-party revenues	$	1,080,032	$	282,771	$	283	$	1,363,086

Sources of Revenue
Technical Services	$	398,664	$	—	$	—	$	398,664
Industrial Services and Other	332,025		—		283		332,308
Field and Emergency Response Services	150,031		—		—		150,031
Safety-Kleen Environmental Services	199,312		52,072		—		251,384
Safety-Kleen Oil	—		230,699		—		230,699
Total third-party revenues	$	1,080,032	$	282,771	$	283	$	1,363,086


	For the Nine Months Ended September 30, 2023
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	3,017,547	$	641,625	$	335	$	3,659,507
Canada	340,196		71,280		—		411,476
Total third-party revenues	$	3,357,743	$	712,905	$	335	$	4,070,983

Sources of Revenue
Technical Services	$	1,160,306	$	—	$	—	$	1,160,306
Industrial Services and Other	1,086,175		—		335		1,086,510
Field and Emergency Response Services	457,491		—		—		457,491
Safety-Kleen Environmental Services	653,771		171,469		—		825,240
Safety-Kleen Oil	—		541,436		—		541,436
Total third-party revenues	$	3,357,743	$	712,905	$	335	$	4,070,983

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	For the Nine Months Ended September 30, 2022
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	2,740,994	$	688,444	$	434	$	3,429,872
Canada	364,342		94,293		—		458,635
Total third-party revenues	$	3,105,336	$	782,737	$	434	$	3,888,507

Sources of Revenue
Technical Services	$	1,109,339	$	—	$	—	$	1,109,339
Industrial Services and Other	1,001,733		—		434		1,002,167
Field and Emergency Response Services	427,250		—		—		427,250
Safety-Kleen Environmental Services	567,014		145,841		—		712,855
Safety-Kleen Oil	—		636,896		—		636,896
Total third-party revenues	$	3,105,336	$	782,737	$	434	$	3,888,507

Contract Balances


(in thousands)	September 30, 2023		December 31, 2022
Receivables	$	1,010,335	$	964,603
Contract assets (unbilled receivables)	130,888		107,010
Contract liabilities (deferred revenue)	102,468		94,094

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, which 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. The contract liability balances at the beginning of each period presented were generally fully recognized in the subsequent three-month period.

(4) BUSINESS COMBINATIONS

2023 Acquisition

On March 31, 2023, the Company acquired Thompson Industrial Services, LLC ("Thompson Industrial") for an all-cash purchase price of $110.9 million, net of cash acquired. In the third quarter of 2023, the Company received $1.0 million after finalizing the acquisition date working capital balances, which decreased the overall purchase price. The operations of Thompson Industrial expand the Environmental Services segment's industrial service operations in the southeastern region of the United States.

The preliminary allocation of the purchase price is provisional and was based on estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date. The Company continues to obtain information to complete the valuation of these balances and the associated income tax accounting. Measurement period adjustments will reflect new information obtained

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about facts and circumstances that existed as of the acquisition date. The following table summarizes the preliminary determination and recognition of assets acquired and liabilities assumed (in thousands):


	At Acquisition Date As Reported March 31, 2023		Measurement Period Adjustments		At Acquisition Date As Reported September 30, 2023
Accounts receivable	$	25,793	$	(450)	$	25,343
Inventories and supplies	233		—		233
Prepaid expenses and other current assets	1,150		155		1,305
Property, plant and equipment	28,030		(1,311)		26,719
Permits and other intangibles	28,100		800		28,900
Operating lease right-of-use assets	4,716		—		4,716
Other non-current assets	36		36		72
Current liabilities	(11,514)		1,269		(10,245)
Current portion of operating lease liabilities	(1,653)		—		(1,653)
Operating lease liabilities, less current portion	(3,063)		—		(3,063)

Other long-term liabilities	—		(560)		(560)
Total identifiable net assets	71,828		(61)		71,767
Goodwill	40,092		(1,004)		39,088
Total purchase price	$	111,920	$	(1,065)	$	110,855

Permits and other intangible assets acquired include customer relationships, trademarks/tradenames and non-compete agreements and are anticipated to have estimated useful lives of between five and 15 years with a weighted average useful life of approximately 13 years. The excess of the total purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible and intangible assets acquired and liabilities assumed, was recorded as goodwill. The goodwill recognized is attributable to the expected operating synergies, assembled workforce and growth potential that the Company expects to realize from the acquisition. Goodwill generated from the acquisition is deductible for tax purposes.

The operations included in the Company's financial statements for the three and nine months ended September 30, 2023, and pro forma revenue and earnings amounts on a combined basis as if this acquisition had been completed on January 1, 2022 are immaterial to the consolidated financial statements of the Company.

2022 Acquisitions

On June 17, 2022, the Company acquired a privately-owned company for an all-cash purchase price of approximately $78.9 million, net of cash acquired. The operations of the newly acquired company expand the Safety-Kleen Sustainability Solutions segment's waste oil collection capabilities and re-refining business throughout the southeastern region of the United States, including the addition of a re-refinery in Georgia.

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The Company finalized the purchase accounting for this acquisition. The allocation of the purchase price was based on estimates of the fair value and assets acquired and liabilities assumed as of June 17, 2022. The following table summarizes the final determination and recognition of assets acquired and liabilities assumed (in thousands):


	At Acquisition Date As Reported December 31, 2022		Measurement Period Adjustments		Final Allocation At Acquisition Date As Reported September 30, 2023
Accounts receivable	$	1,111	$	(22)	$	1,089
Inventories and supplies	5,816		(71)		5,745
Prepaid expenses and other current assets	144		—		144
Property, plant and equipment	19,605		2,626		22,231
Permits and other intangibles	23,500		—		23,500
Operating lease right-of-use assets	585		—		585
Other non-current assets	13		—		13
Current liabilities	(3,271)		(104)		(3,375)
Current portion of operating lease liabilities	(186)		—		(186)
Operating lease liabilities, less current portion	(399)		—		(399)

Other long-term liabilities	(55)		(2,626)		(2,681)
Total identifiable net assets	46,863		(197)		46,666
Goodwill	32,015		197		32,212
Total purchase price	$	78,878	$	—	$	78,878

Permits and other intangible assets acquired include supplier relationships, permits, customer relationships and trademarks/tradenames and are anticipated to have estimated useful lives of between five and 20 years with a weighted average useful life of approximately 18 years. The excess of the total purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible and intangible assets acquired, was recorded as goodwill. The goodwill recognized is attributable to the expected operating synergies, assembled workforce and growth potential that the Company expects to realize from the acquisition. Goodwill generated from the acquisition is deductible for tax purposes.

On December 9, 2022, the Company acquired a privately-owned business for $12.6 million cash consideration. The acquired company expands the Safety-Kleen Sustainability Solutions segment's oil collection operations in the southeastern region of the United States. In connection with this acquisition, goodwill of $2.6 million was recognized. The results of operations for the acquired business were not material in 2022.

(5) DISPOSITION OF BUSINESS

On June 30, 2022, the Company completed the sale of a line of business as part of its continuous focus on divesting certain non-core operations. The divested line of business was previously included within the Environmental Sales & Service reporting unit of the Environmental Services segment. The Company determined that the disposition did not constitute a strategic shift and that the impact on the Company's overall operations and financial results is not be material. Accordingly, the operations associated with the disposal were not reported in discontinued operations. The final purchase price for the line of business was $18.8 million, after settling working capital. The gain on sale of $8.9 million, after accounting for the assets sold, liabilities transferred upon sale and transaction costs, was included in gain on sale of business in the Company's consolidated statement of operations for the nine months ended September 30, 2022.

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(6) INVENTORIES AND SUPPLIES

Inventories and supplies consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Oil and oil related products	$	109,345	$	151,519
Supplies	170,512		143,743
Solvent and solutions	11,519		11,994
Other	20,136		17,738
Total inventories and supplies	$	311,512	$	324,994

Supplies inventories consist primarily of critical spare parts to support the Company's incinerator and re-refinery operations and other general supplies used in our normal day-to-day operations. Other inventories consist primarily of parts washer components, cleaning fluids, absorbents and automotive fluids, such as windshield washer fluid and antifreeze.

(7) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Land	$	174,598	$	172,579
Asset retirement costs (non-landfill)	27,100		22,001
Landfill assets	247,822		232,872
Buildings and improvements (1)	622,059		591,397

Vehicles (2)	1,214,945		1,112,188
Equipment (3)	2,343,272		2,195,064

Construction in progress	191,311		140,328
	4,821,107		4,466,429
Less - accumulated depreciation and amortization	2,692,599		2,486,127
Total property, plant and equipment, net	$	2,128,508	$	1,980,302

________________

(1) Balances inclusive of gross right-of-use ("ROU") assets classified as finance leases of $8.0 million in both periods.

(2) Balances inclusive of gross ROU assets classified as finance leases of $132.5 million and $106.7 million, respectively.

(3) Balances inclusive of gross ROU assets classified as finance leases of $9.2 million in both periods.

Depreciation expense, inclusive of landfill and finance lease amortization, was $80.4 million and $229.7 million for the three and nine months ended September 30, 2023, respectively. Depreciation expense, inclusive of landfill and finance lease amortization, was $75.3 million and $223.0 million for the three and nine months ended September 30, 2022, respectively. The Company recorded $1.7 million and $4.4 million of capitalized interest during the three and nine months ended September 30, 2023, respectively. The Company recorded $0.9 million and $2.0 million of capitalized interest during the three and nine months ended September 30, 2022, respectively. The capitalized interest in all periods is mainly due to the construction of a new incinerator in Kimball, Nebraska.

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(8) GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in goodwill by segment for the nine months ended September 30, 2023 were as follows (in thousands):


	Environmental Services		Safety-Kleen Sustainability Solutions		Totals
Balance at January 1, 2023	$	1,071,846	$	175,032	$	1,246,878
Increase from current period acquisition	39,088		—		39,088
Measurement period adjustments from prior period acquisitions	—		342		342

Foreign currency translation	118		47		165
Balance at September 30, 2023	$	1,111,052	$	175,421	$	1,286,473

The Company assesses goodwill on an annual basis as of December 31 or at an interim date when events or changes in the business environment (“triggering events”) would more likely than not reduce the fair value of a reporting unit below its carrying value. During the period ended September 30, 2023, no such triggering events were identified.

As of September 30, 2023 and December 31, 2022, the Company's intangible assets consisted of the following (in thousands):


	September 30, 2023						December 31, 2022
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Permits	$	189,982	$	115,122	$	74,860	$	188,373	$	109,036	$	79,337
Customer and supplier relationships	604,493		251,378		353,115		583,709		229,368		354,341
Other intangible assets	100,012		34,547		65,465		89,388		24,818		64,570
Total amortizable permits and other intangible assets	894,487		401,047		493,440		861,470		363,222		498,248
Trademarks and trade names	120,100		—		120,100		122,534		—		122,534
Total permits and other intangible assets	$	1,014,587	$	401,047	$	613,540	$	984,004	$	363,222	$	620,782

Amortization expense of permits, customer and supplier relationships and other intangible assets was $12.5 million and $37.8 million in the three and nine months ended September 30, 2023, respectively. Amortization expense of permits, customer and supplier relationships and other intangible assets was $13.1 million and $37.6 million in the three and nine months ended September 30, 2022, respectively.

The expected amortization of the net carrying amount of finite-lived intangible assets at September 30, 2023 was as follows (in thousands):


Years Ending December 31,	Expected Amortization
2023 (three months)	$	12,420
2024	46,437
2025	43,042
2026	41,143
2027	39,067
Thereafter	311,331
	$	493,440

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(9) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following (in thousands):


	September 30, 2023		December 31, 2022
Accrued insurance	$	98,803	$	92,909
Accrued interest	14,791		20,033
Accrued compensation and benefits	98,108		123,226
Accrued income, real estate, sales and other taxes	59,035		61,442

Accrued other	98,360		99,106
	$	369,097	$	396,716

(10) CLOSURE AND POST-CLOSURE LIABILITIES

The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) from January 1, 2023 through September 30, 2023 were as follows (in thousands):


	Landfill Retirement Liability		Non-Landfill Retirement Liability		Total
Balance at January 1, 2023	$	62,251	$	56,550	$	118,801
Liabilities assumed in acquisitions	—		574		574
Measurement period adjustments from prior period acquisitions	—		3,015		3,015
New asset retirement obligations	2,221		—		2,221

Accretion	3,765		3,351		7,116
Changes in estimates recorded to consolidated statement of operations	—		47		47
Changes in estimates recorded to consolidated balance sheet	(327)		1,461		1,134
Expenditures	(7,205)		(5,852)		(13,057)
Currency translation and other	20		20		40
Balance at September 30, 2023	$	60,725	$	59,166	$	119,891

During the first quarter of 2023, the Company's non-commercial landfill at the Deer Park, Texas incineration facility reached its permitted capacity, as expected. The Company has commenced closure activities; however, there have been no changes to the liabilities related to this location. In the nine months ended September 30, 2023, there were no significant benefits or charges resulting from changes in estimates for closure and post-closure liabilities.

(11) REMEDIAL LIABILITIES

The changes to remedial liabilities from January 1, 2023 through September 30, 2023 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, 2023	$	1,824	$	59,749	$	54,717	$	116,290


Accretion	66		1,918		1,181		3,165
Changes in estimates recorded to consolidated statement of operations	13		1,318		1,880		3,211
Expenditures	(39)		(2,896)		(8,072)		(11,007)
Currency translation and other	—		1		44		45
Balance at September 30, 2023	$	1,864	$	60,090	$	49,750	$	111,704

In the nine months ended September 30, 2023, the Company increased its remedial liabilities for an inactive site and an active site by $1.1 million each due to changes in the estimates of the related liabilities to account for new information obtained regarding the ultimate remediation of these sites.

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(12) FINANCING ARRANGEMENTS

Long-term Debt

The following table is a summary of the Company’s long-term debt (in thousands):


Current Portion of Long-Term Debt:	September 30, 2023		December 31, 2022
Secured senior term loans	$	10,000	$	10,000

Long-Term Debt:
Secured senior term loans due June 30, 2024 ("2024 Term Loans")	$	—	$