Company Quick10K Filing
Quick10K
Clean Harbors
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$69.78 56 $3,900
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
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
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-02 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-07-02 Other Events, Exhibits
8-K 2019-06-18 Enter Agreement, Other Events, Exhibits
8-K 2019-06-18 Regulation FD, Exhibits
8-K 2019-06-05 Officers, Shareholder Vote, Exhibits
8-K 2019-05-03 Code of Ethics
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-02-27 Earnings, Exhibits
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
POST Post Holdings 7,950
FSCT Forescout Technologies 1,950
SJW SJW Group 1,730
ENPH Enphase Energy 1,490
OBNK Origin Bancorp 806
LLIT Lianluo Smart 26
CTHR Charles & Colvard 25
EFOI Energy Focus 7
C964 Heron Lake Bioenergy 0
CNCG Concierge Technologies 0
CLH 2019-03-31
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-3312019ex311.htm
EX-31.2 clh-3312019ex312.htm
EX-32 clh-3312019ex32.htm

Clean Harbors Earnings 2019-03-31

CLH 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 clh-3312019xq1.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
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
 
55,870,615
(Class)
 
(Outstanding as of April 26, 2019)



CLEAN HARBORS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 






CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)
 
March 31,
2019
 
December 31, 2018
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
167,371

 
$
226,507

Short-term marketable securities
57,477

 
52,856

Accounts receivable, net of allowances aggregating $37,409 and $44,315, respectively
613,507

 
606,952

Unbilled accounts receivable
42,513

 
54,794

Deferred costs
20,515

 
18,770

Inventories and supplies
200,814

 
199,479

Prepaid expenses and other current assets
45,925

 
42,800

Total current assets
1,148,122

 
1,202,158

Property, plant and equipment, net
1,588,613

 
1,561,978

Other assets:
 
 
 
Operating lease right-of-use assets
170,550

 

Goodwill
517,910

 
514,189

Permits and other intangibles, net
438,958

 
441,875

Other
17,901

 
18,121

Total other assets
1,145,319

 
974,185

Total assets
$
3,882,054

 
$
3,738,321

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

 
$
7,535

Accounts payable
242,260

 
276,461

Deferred revenue
67,557

 
61,843

Accrued expenses
208,386

 
233,405

Current portion of closure, post-closure and remedial liabilities
27,914

 
23,034

Current portion of operating lease liabilities
43,858

 

Total current liabilities
597,510

 
602,278

Other liabilities:
 
 
 
Closure and post-closure liabilities, less current portion of $12,337 and $9,592, respectively
62,084

 
60,339

Remedial liabilities, less current portion of $15,577 and $13,442, respectively
103,384

 
107,575

Long-term obligations, less current portion
1,564,005

 
1,565,021

Operating lease liabilities, less current portion
128,689

 

Deferred taxes, unrecognized tax benefits and other long-term liabilities
254,417

 
233,352

Total other liabilities
2,112,579

 
1,966,287

Commitments and contingent liabilities (See Note 16)


 


Stockholders’ equity:
 
 
 
Common stock, $.01 par value:
 
 
 
Authorized 80,000,000; shares issued and outstanding 55,827,714 and 55,847,261 shares, respectively
558

 
558

Additional paid-in capital
652,624

 
655,415

Accumulated other comprehensive loss
(219,347
)
 
(223,371
)
Accumulated earnings
738,130

 
737,154

Total stockholders’ equity
1,171,965

 
1,169,756

Total liabilities and stockholders’ equity
$
3,882,054

 
$
3,738,321

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
 
 
March 31,
 
 
2019
 
2018
Revenues:
 
 
 
 
Service revenues
 
$
656,658

 
$
619,719

Product revenues
 
124,181

 
130,059

Total revenues
 
780,839

 
749,778

Cost of revenues: (exclusive of items shown separately below)
 
 
 
 
Service revenues
 
463,483

 
447,649

Product revenues
 
100,881

 
98,776

Total cost of revenues
 
564,364

 
546,425

Selling, general and administrative expenses
 
114,812

 
115,088

Accretion of environmental liabilities
 
2,574

 
2,430

Depreciation and amortization
 
75,355

 
74,844

Income from operations
 
23,734

 
10,991

Other income (expense), net
 
2,983

 
(299
)
Interest expense, net of interest income of $926 and $764, respectively
 
(19,764
)
 
(20,270
)
Income (loss) before provision for income taxes
 
6,953

 
(9,578
)
Provision for income taxes
 
5,977

 
3,053

Net income (loss)
 
$
976

 
$
(12,631
)
Earnings (loss) per share:
 
 
 
 
Basic
 
$
0.02

 
$
(0.22
)
Diluted
 
$
0.02

 
$
(0.22
)
Shares used to compute earnings (loss) per share - Basic
 
55,848

 
56,457

Shares used to compute earnings (loss) per share - Diluted
 
56,082

 
56,457


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 (LOSS)

(in thousands)
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
Net income (loss)
 
$
976

 
$
(12,631
)
Other comprehensive income (loss):
 
 
 
 
Unrealized gains (losses) on available-for-sale securities (net of tax of $31 and $80, respectively)
 
143

 
(195
)
Unrealized loss on interest rate hedge
 
(5,017
)
 

Reclassification adjustment for losses on interest rate hedge included in net income (loss) (net of taxes of $0 and $0, respectively)
 
358

 

Foreign currency translation adjustments
 
8,540

 
(16,551
)
Other comprehensive income (loss)
 
4,024

 
(16,746
)
Comprehensive income (loss)
 
$
5,000

 
$
(29,377
)

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)
 
Three Months Ended
 
March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income (loss)
$
976

 
$
(12,631
)
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Depreciation and amortization
75,355

 
74,844

Allowance for doubtful accounts
(3,425
)
 
2,303

Amortization of deferred financing costs and debt discount
1,000

 
916

Accretion of environmental liabilities
2,574

 
2,430

Changes in environmental liability estimates
(774
)
 
(562
)
Deferred income taxes

 
(5
)
Other (income) expense, net
(2,983
)
 
299

Stock-based compensation
5,809

 
3,077

Environmental expenditures
(3,264
)
 
(2,425
)
Changes in assets and liabilities, net of acquisitions
 
 
 
Accounts receivable and unbilled accounts receivable
12,086

 
(14,769
)
Inventories and supplies
(832
)
 
(5,625
)
Other current and non-current assets
(11,738
)
 
(2,923
)
Accounts payable
(27,956
)
 
9,714

Other current and long-term liabilities
(17,088
)
 
(2,740
)
 Net cash from operating activities
29,740

 
51,903

Cash flows used in investing activities:
 
 
 
Additions to property, plant and equipment
(58,947
)
 
(44,242
)
Proceeds from sale and disposal of fixed assets
4,321

 
798

Acquisitions, net of cash acquired
(14,870
)
 
(120,000
)
Additions to intangible assets including costs to obtain or renew permits
(1,132
)
 
(1,245
)
  Proceeds from sale of available-for-sale securities
8,600

 
3,264

Purchases of available-for-sale securities
(12,941
)
 
(3,003
)
Net cash used in investing activities
(74,969
)
 
(164,428
)
Cash flows used in financing activities:
 
 
 
Change in uncashed checks
(4,769
)
 
(3,843
)
Tax payments related to withholdings on vested restricted stock
(2,276
)
 
(548
)
Repurchases of common stock
(6,324
)
 
(14,264
)
Payments on finance lease
(115
)
 

Principal payments on debt
(1,884
)
 
(1,000
)
Net cash used in financing activities
(15,368
)
 
(19,655
)
Effect of exchange rate change on cash
1,461

 
(867
)
Decrease in cash and cash equivalents
(59,136
)
 
(133,047
)
Cash and cash equivalents, beginning of period
226,507

 
319,399

Cash and cash equivalents, end of period
$
167,371

 
$
186,352

Supplemental information:
 
 
 
Cash payments for interest and income taxes:
 
 
 
Interest paid
$
8,712

 
$
14,676

Income taxes paid
967

 
1,999

Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
        Operating cash flows from operating leases
13,554

 

        Operating cash flows from finance lease
321

 

        Financing cash flows from finance lease
115

 

Non-cash investing activities:
 
 
 
Property, plant and equipment accrued
13,002

 
17,911

ROU assets obtained in exchange for new operating lease liabilities
(3,896
)
 

ROU asset obtained in exchange for new finance lease liability
23,027

 

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)

 
Three Month Period Ended March 31, 2019
 
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, 2019
55,847

 
$
558

 
$
655,415

 
$
(223,371
)
 
$
737,154

 
$
1,169,756

Net income

 

 

 

 
976

 
976

Other comprehensive income

 

 

 
4,024

 

 
4,024

Stock-based compensation

 

 
5,809

 

 

 
5,809

Issuance of restricted shares, net of shares remitted and tax withholdings
78

 
1

 
(2,277
)
 

 

 
(2,276
)
Repurchases of common stock
(97
)
 
(1
)
 
(6,323
)
 

 

 
(6,324
)
Balance at March 31, 2019
55,828

 
$
558

 
$
652,624

 
$
(219,347
)
 
$
738,130

 
$
1,171,965



 
Three Month Period Ended March 31, 2018
 
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 loss

 

 

 

 
(12,631
)
 
(12,631
)
Other comprehensive loss

 

 

 
(16,746
)
 

 
(16,746
)
Stock-based compensation

 

 
3,077

 

 

 
3,077

Issuance of restricted shares, net of shares remitted and tax withholdings
24

 

 
(548
)
 

 

 
(548
)
Repurchases of common stock
(280
)
 
(3
)
 
(14,261
)
 

 

 
(14,264
)
Balance at March 31, 2018
56,245

 
$
562

 
$
675,230

 
$
(189,153
)
 
$
658,887

 
$
1,145,526







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, 2018.
(2) SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are described in Note 2, "Significant Accounting Policies," and Note 3, "Revenues," in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. There have been no material changes in these policies or their application except for the changes described below.
Recent Accounting Pronouncements
Standards implemented
In February 2016, the Financial Accounting Standards Board ("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. The Company adopted Topic 842 on January 1, 2019 using the modified retrospective method of adoption. Prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historical accounting methodology pursuant to ASC 840, Leases. As permitted under the transition guidance, the Company elected to apply the package of three practical expedients for all existing leases which, among other things, allowed us to maintain the lease classification for all existing leases at the adoption date. The adoption of Topic 842 resulted in the recognition of right-of-use (“ROU”) assets of $185.5 million and total current and noncurrent lease liabilities of $188.5 million at adoption. Additionally, Topic 842 required new and expanded disclosures to enable users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. The standard did not have a material impact on the consolidated statements of operations or cash flows.
Leases
The Company’s leases predominately relate to real estate and equipment such as vehicles and industrial equipment utilized in operations as well as rail cars utilized in connection with the Company’s transportation needs. Contracts are reviewed at inception to determine if the arrangement is a lease and, if so, whether it is an operating or finance lease. For all of its leases, the Company has elected not to separate lease and nonlease components, such as common area maintenance.
The Company generally enters into real estate leases with five to ten-year terms and non-real estate leases with two to seven-year terms. In the normal course of business, the Company also enters into short-term leases having terms of less than one-year. These leases are generally equipment leases entered into for short periods of time (e.g. daily, weekly or monthly), and done so to satisfy immediate and/or short-term operational needs of the business which can arise based upon the nature of particular services performed or seasonality factors. The Company has elected not to recognize ROU assets and lease liabilities for these short-term leases. Expense for all such short-term leases is disclosed as short-term lease cost as shown in Note 17, "Leases."
Operating and finance leases with terms exceeding one year are recognized as ROU assets and lease liabilities and measured based on the present value of the future lease payments over the lease term at commencement date. When applicable, the ROU asset includes any lease payments made at or before the commencement date and initial direct costs incurred and is reduced by lease incentives received under the lease agreement, if any.
Certain of the Company's real estate leases contain escalating future lease payments. Escalating lease payments that are based upon explicit amounts contained in the lease or an index (e.g., consumer price index) are included in its determination of future lease payments to determine the ROU asset and lease liability recognized at the commencement date. Any differences in the future lease

6


payments from initial recognition are not anticipated to be material and will be recorded as variable lease cost in the period incurred.  The variable lease cost will also include the Company’s portion of property tax, utilities and common area maintenance. A significant portion of the Company’s real estate lease agreements include renewal periods at the Company’s option. The Company includes these renewal periods in the lease term only when renewal is reasonably certain based upon facts and circumstances specific to the lease and known by the Company. The Company uses its incremental borrowing rate on collateralized debt based on the information available at the lease commencement date in determining the present value of future lease payments as the implicit rate is typically not readily determinable.
(3) REVENUES
Revenue Recognition
The Company generates services and product revenues through the following operating segments: Environmental Services and Safety-Kleen. The Company recognizes revenue 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. Product revenues are recognized when the products are delivered and control transfers to the customer.
Nature of Goods and Services
The majority of the Company’s contracts are for services, which are recognized based on time and materials incurred at contractually agreed-upon rates. The Company’s payment terms vary by the type and location of its customers and the products or services offered. The periods between invoicing and when payments are due are not significant. Any amounts billed to customers related to shipping and handling are classified as revenue and the Company's shipping and handling costs are included in costs of revenues. In the course of the Company's operations, it collects sales tax and other excise taxes from its customers and recognizes a current liability which is then relieved when the taxes are remitted to the appropriate governmental authorities. The Company excludes sales and other excise taxes that it collects from customers from its revenues.
Disaggregation of Revenue
The following table presents the Company’s third-party revenues disaggregated by revenue source (in thousands):
 
 
For the Three Months Ended March 31, 2019
 
 
Environmental Services
 
Safety-Kleen
 
Corporate
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
 
United States
 
$
388,169

 
$
286,574

 
$
594

 
$
675,337

Canada
 
85,529

 
19,973

 

 
105,502

Total third-party revenues
 
$
473,698

 
$
306,547

 
$
594

 
$
780,839

 
 
 
 
 
 
 
 
 
Sources of Revenue (1)
 
 
 
 
 
 
 
 
Technical Services
 
$
251,919

 
$

 
$

 
$
251,919

Field and Emergency Response Services
 
71,626

 

 

 
71,626

Industrial Services
 
116,098

 

 

 
116,098

Oil, Gas and Lodging Services and Other
 
34,055

 

 
594

 
34,649

Safety-Kleen Environmental Services
 

 
207,083

 

 
207,083

Safety-Kleen Oil (2)
 

 
99,464

 

 
99,464

Total third-party revenues
 
$
473,698

 
$
306,547

 
$
594

 
$
780,839



7


 
 
For the Three Months Ended March 31, 2018
 
 
Environmental Services
 
Safety-Kleen
 
Corporate
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
 
United States
 
$
343,972

 
$
287,642

 
$
145

 
$
631,759

Canada
 
95,716

 
22,276

 
27

 
118,019

Total third-party revenues
 
$
439,688

 
$
309,918

 
$
172

 
$
749,778

 
 
 
 
 
 
 
 
 
Sources of Revenue (1)
 
 
 
 
 
 
 
 
Technical Services
 
$
236,306

 
$

 
$

 
$
236,306

Field and Emergency Response Services
 
69,935

 

 

 
69,935

Industrial Services
 
103,763

 

 

 
103,763

Oil, Gas and Lodging Services and Other
 
29,684

 

 
172

 
29,856

Safety-Kleen Environmental Services
 

 
194,161

 

 
194,161

Safety-Kleen Oil (2)
 

 
115,757

 

 
115,757

Total third-party revenues
 
$
439,688

 
$
309,918

 
$
172

 
$
749,778

______________________
(1)
All revenue except oil and oil product sales within Safety-Kleen Oil and product sales within Safety-Kleen Environmental Services, which include various automotive related fluids, shop supplies and direct blended oil sales, are recognized over time. Safety-Kleen Oil and Safety-Kleen Environmental Services product sales are recognized at a point in time.
(2)
Safety-Kleen Oil was formerly known as Kleen Performance Products.
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 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. 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 the 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, 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 services, decoking and pigging, chemical cleaning, high and ultra-high pressure water cleaning, pipeline inspection and coating

8


services, large tank and surface impoundment cleaning, oilfield transport, daylighting, production services and directional boring services 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 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.
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 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. Revenue for lodging accommodation services is recognized over time based on passage of time.
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 through a network of branch locations. 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 complementary supply products including automotive fluids and shop supplies 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 services. 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. Product revenue is recognized upon the transfer of control whereby control transfers when the products are delivered to the customer.
Safety-Kleen Oil. Safety-Kleen Oil 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.
Contract Balances
 
 
March 31, 2019
 
December 31, 2018
Receivables
 
$
613,507

 
$
606,952

Contract assets (unbilled receivables)
 
42,513

 
54,794

Contract liabilities (deferred revenue)
 
67,557

 
61,843


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 sheets. 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 sheets on a contract-by-contract basis at the end of each reporting period. As part of the acquisition of the Veolia Business (as defined in Note 4, "Business Combinations") on February 23, 2018, the Company acquired receivables and contract assets of $21.5 million and $18.1 million, respectively. Changes in the contract asset and liability balances during the three-month periods ended March 31, 2019 and December 31, 2018 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.

Variable Consideration
The nature of the Company's contracts give rise to certain types of variable consideration, including in limited cases volume discounts. Accordingly, management establishes a revenue allowance to cover the estimated amounts of revenue that may need to be credited to customers' accounts in future periods. The Company estimates the amount of variable consideration to include in the

9


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.
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
2019 Acquisition
On March 1, 2019, the Company acquired certain assets of a privately-owned company for $10.4 million. The acquired assets complement the Safety-Kleen segment's core service offerings, such as used motor oil collection, parts washers, oil filter recycling and vacuum services. In connection with this acquisition, a preliminary goodwill amount of $6.8 million was recognized.

2018 Acquisitions
        
On August 31, 2018, the Company acquired a privately-owned company which expands the environmental services and waste oil capabilities of the Company for a $27.3 million purchase price, net of cash. The acquired company is included in the Safety-Kleen and Environmental Services segments. In connection with this acquisition, a preliminary goodwill amount of $12.4 million was recognized. The results of operations of this acquired business were not material in 2019.
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 $124.5 million. The amount of pre-tax income for the three months ended March 31, 2018 was immaterial. During the three months ended March 31, 2019, the Veolia Business was fully integrated into the Environmental Services segment, and therefore it is impracticable to measure earnings attributable to the Veolia Business for that period.

The Company finalized purchase accounting for the Veolia Business in the first quarter of 2019. The components and allocation of the purchase price for the Veolia Business consist of the following amounts (in thousands):
 
Final Allocation
Accounts receivable, including unbilled receivables
$
39,558

Inventories and supplies
1,126

Prepaid expenses and other current assets
828

Property, plant and equipment
72,243

Permits and other intangibles
5,140

Current liabilities
(18,372
)
Closure and post-closure liabilities
(354
)
Total identifiable net assets
100,169

Goodwill
24,331

Total purchase price
$
124,500


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

10


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.

(5) INVENTORIES AND SUPPLIES
Inventories and supplies consisted of the following (in thousands):
 
March 31, 2019
 
December 31, 2018
Oil and oil products
$
67,888

 
$
70,823

Supplies and drums
108,976

 
104,609

Solvent and solutions
10,500

 
10,657

Other
13,450

 
13,390

Total inventories and supplies
$
200,814

 
$
199,479

Supplies and drums consist primarily of drums and containers used in providing the Company's products and services as well as critical spare parts to support the Company's incinerator and re-refinery operations. Other inventories consisted primarily of parts washer components, cleaning fluids, absorbents and automotive fluids, such as windshield washer fluid and antifreeze.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
 
March 31, 2019
 
December 31, 2018
Land
$
129,684

 
$
123,734

Asset retirement costs (non-landfill)
15,258

 
15,148

Landfill assets
160,093

 
154,918

Buildings and improvements (1)
465,707

 
440,188

Camp equipment
156,031

 
152,998

Vehicles
753,490

 
721,735

Equipment
1,711,470

 
1,697,490

Furniture and fixtures
5,476

 
5,453

Construction in progress
27,028

 
20,931

 
3,424,237

 
3,332,595

Less - accumulated depreciation and amortization
1,835,624

 
1,770,617

Total property, plant and equipment, net
$
1,588,613

 
$
1,561,978

______________________
(1) Inclusive of finance lease.
Interest in the amount of $0.1 million and $0.3 million was capitalized to property, plant and equipment during the three months ended March 31, 2019 and March 31, 2018, respectively. Depreciation expense, inclusive of landfill and finance lease amortization, was $65.9 million and $65.6 million for the three months ended March 31, 2019 and March 31, 2018, respectively.
(7) GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in goodwill by segment for the three months ended March 31, 2019 were as follows (in thousands):
 
Environmental Services
 
Safety-Kleen
 
Totals
Balance at January 1, 2019
$
207,019

 
$
307,170

 
$
514,189

Increase from current period acquisitions

 
6,825

 
6,825

Measurement period adjustments from prior period acquisitions
(2,571
)
 
(1,422
)
 
(3,993
)
Foreign currency translation
412

 
477

 
889

Balance at March 31, 2019
$
204,860

 
$
313,050

 
$
517,910

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.

11


As of March 31, 2019 and December 31, 2018, the Company's total intangible assets consisted of the following (in thousands):
 
March 31, 2019
 
December 31, 2018
 
Cost
 
Accumulated
Amortization
 
Net
 
Cost
 
Accumulated
Amortization
 
Net
Permits
$
180,463

 
$
81,135

 
$
99,328

 
$
177,583

 
$
79,358

 
$
98,225

Customer and supplier relationships
397,949

 
187,195

 
210,754

 
393,487

 
179,824

 
213,663

Other intangible assets
37,616

 
31,363

 
6,253

 
37,262

 
29,743

 
7,519

Total amortizable permits and other intangible assets
616,028

 
299,693

 
316,335

 
608,332

 
288,925

 
319,407

Trademarks and trade names
122,623

 

 
122,623

 
122,468

 

 
122,468

Total permits and other intangible assets
$
738,651

 
$
299,693

 
$
438,958

 
$
730,800

 
$
288,925

 
$
441,875

Amortization expense of permits and other intangible assets was $9.5 million and $9.2 million in the three months ended March 31, 2019 and March 31, 2018, respectively.
The expected amortization of the net carrying amount of finite-lived intangible assets at March 31, 2019 was as follows (in thousands):
Years Ending December 31,
Expected Amortization
2019 (nine months)
$
24,947

2020
31,289

2021
28,020

2022
27,849

2023
23,862

Thereafter
180,368

 
$
316,335


(8) ACCRUED EXPENSES
Accrued expenses consisted of the following at March 31, 2019 and December 31, 2018 (in thousands):
 
March 31, 2019
 
December 31, 2018
Insurance
$
64,298

 
$
70,217

Interest
14,783

 
3,930

Accrued compensation and benefits
46,757

 
77,881

Income, real estate, sales and other taxes
30,289

 
25,670

Other
52,259

 
55,707

 
$
208,386

 
$
233,405


12


(9) CLOSURE AND POST-CLOSURE LIABILITIES
The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) from January 1, 2019 through March 31, 2019 were as follows (in thousands):
 
Landfill
Retirement
Liability
 
Non-Landfill
Retirement
Liability
 
Total
Balance at January 1, 2019
$
37,809

 
$
32,122

 
$
69,931

Liabilities assumed in acquisition

 
98

 
98

New asset retirement obligations
719

 

 
719

Accretion
742

 
689

 
1,431

Changes in estimates recorded to statement of operations

 
40

 
40

Changes in estimates recorded to balance sheet
2,798

 

 
2,798

Expenditures
(163
)
 
(629
)
 
(792
)
Currency translation and other
50

 
146

 
196

Balance at March 31, 2019
$
41,955

 
$
32,466

 
$
74,421

All the landfill facilities included in the above were active as of March 31, 2019. There were no significant charges (benefits) in 2019 resulting from changes in estimates for closure and post-closure liabilities.
New asset retirement obligations incurred during the first three months of 2019 were discounted at the credit-adjusted risk-free rate of 6.02%.

(10) REMEDIAL LIABILITIES 
The changes to remedial liabilities for the three months ended March 31, 2019 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, 2019
$
1,838

 
$
65,315

 
$
53,864

 
$
121,017

Accretion
22

 
675

 
446

 
1,143

Changes in estimates recorded to statement of operations
23

 
172

 
(1,009
)
 
(814
)
Expenditures
(15
)
 
(1,154
)
 
(1,303
)
 
(2,472
)
Currency translation and other

 
10

 
77

 
87

Balance at March 31, 2019
$
1,868

 
$
65,018

 
$
52,075

 
$
118,961

In the three months ended March 31, 2019, there were no significant charges (benefits) resulting from changes in estimates for remedial liabilities.


13


(11) FINANCING ARRANGEMENTS
The following table is a summary of the Company’s financing arrangements (in thousands):
Current Obligations:
March 31, 2019
 
December 31, 2018
Senior secured Term Loan Agreement ("Term Loan Agreement")
$
7,535

 
$
7,535

 
 
 
 
Long-Term Obligations:
 
 
 
Senior secured Term Loan Agreement due June 30, 2024
$
732,813

 
$
734,697

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

 
845,000

Long-term obligations, at par
$
1,577,813

 
$
1,579,697

Unamortized debt issuance costs and premium, net
(13,808
)
 
(14,676
)
Long-term obligations, at carrying value
$
1,564,005

 
$
1,565,021

   
Financing Activities
At March 31, 2019 and December 31, 2018, the fair value of the Term Loan Agreement debt was $738.5 million and $707.0 million, respectively, based on quoted market prices or other available market data. At March 31, 2019 and December 31, 2018, the fair value of the Company's 2021 Notes was $846.1 million and $845.0 million, respectively, based on quoted market prices for the instrument. The fair values of the Company's currently outstanding term loans under the Term Loan Agreement (the "Term Loans") 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 the Company had no outstanding loan balance as of March 31, 2019 and December 31, 2018. At March 31, 2019, approximately $209.1 million was available to borrow and outstanding letters of credit were $153.3 million. At December 31, 2018, $235.4 million was available to borrow and outstanding letters of credit were $130.1 million.    
Cash Flow Hedges
The Company’s strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements. Although the interest rate on all $740.3 million aggregate principal amount of Term Loans which were outstanding on March 31, 2019 is variable under the Term Loan Agreement, the Company has effectively fixed the interest rate on $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 one-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 March 31, 2019 and December 31, 2018, the Company has recorded a derivative liability with a fair value of $13.4 million and $8.8 million, respectively, 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. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency for similar assets and liabilities.
(12) 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.

14


The Company’s effective tax rate for the three months ended March 31, 2019 was 86.0% compared to (31.9)% for the same period in 2018. The variations in the effective income tax rates for the three months ended March 31, 2019 and March 31, 2018, 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.
As of March 31, 2019 and December 31, 2018, the Company had recorded $3.2 million of liabilities for unrecognized tax benefits and $0.8 million of interest.
During the first quarter of 2019 the Company was notified by the Internal Revenue Service (“IRS”) of their intent to examine tax years 2014-2016.  The Company does not believe the examination will result in material liabilities.
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.

(13) EARNINGS (LOSS) PER SHARE     
The following are computations of basic and diluted earnings (loss) per share (in thousands except for per share amounts):
 
 
Three Months Ended
 
 
March 31,
 
 
2019
 
2018
Numerator for basic and diluted earnings (loss) per share:
 
 
 
 
Net income (loss)
 
$
976

 
$
(12,631
)
 
 
 
 
 
Denominator:
 
 
 
 
Basic shares outstanding
 
55,848

 
56,457

Dilutive effect of stock-based compensation awards
 
234

 

Dilutive shares outstanding
 
56,082

 
56,457

 
 
 
 
 
Basic income (loss) per share:
 
$
0.02

 
$
(0.22
)
 
 
 

 
 

Diluted income (loss) per share:
 
$
0.02

 
$
(0.22
)
For the three months ended March 31, 2019, the dilutive effect of all then outstanding restricted stock and performance awards is included in the earnings per share calculation above except for 78,271 of performance stock awards for which the performance criteria were not attained at that time and 27,357 of restricted stock awards which were antidilutive.
As a result of the net loss reported for the three months ended March 31, 2018, all then outstanding restricted stock awards and performance awards totaling 896,180 were excluded from the calculation of diluted loss per share as their inclusion would have an antidilutive effect.

15


(14) ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component and related tax effects for the three months ended March 31, 2019 were as follows (in thousands):    
 
Foreign Currency Translation
 
Unrealized Losses (Gains) on Available-For-Sale Securities
 
Unrealized Losses on Interest Rate Hedge
 
Unfunded Pension Liability
 
Total
Balance at January 1, 2019
$
(212,925
)
 
$
(69
)
 
$
(8,773
)
 
$
(1,604
)
 
$
(223,371
)
Other comprehensive income (loss) before tax effects
8,540

 
174

 
(5,017
)
 

 
3,697

Tax impact related to items in other comprehensive income (loss)

 
(31
)
 

 

 
(31
)
Amounts reclassified out of accumulated other comprehensive loss

 

 
358

 

 
358

Other comprehensive income (loss)
8,540

 
143

 
(4,659
)
 

 
4,024

Balance at March 31, 2019
$
(204,385
)
 
$
74

 
$
(13,432
)
 
$
(1,604
)
 
$
(219,347
)
The amounts reclassified out of accumulated other comprehensive loss into the consolidated statement of operations, with presentation location, during the three months ended March 31, 2019 were as follows (in thousands):
 
 
For the Three Months Ended March 31, 2019
 
 
Other Comprehensive Income (Loss) Components
 
 
Location
Unrealized loss on interest rate hedge
 
$
(358
)
 
Interest expense, net of interest income
There were no reclassifications out of accumulated other comprehensive loss during the three months ended March 31, 2018.
(15) STOCK-BASED COMPENSATION
Total stock-based compensation cost charged to selling, general and administrative expenses for the three months ended March 31, 2019 and March 31, 2018 was $5.8 million and $3.1 million, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $1.1 million and $0.9 million for the three months ended March 31, 2019 and March 31, 2018, 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 plan adopted in 2010 (the "2010 Plan"). 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 three months ended March 31, 2019:
Restricted Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2019
657,240

 
$
54.65

Granted
42,300

 
61.18

Vested
(61,391
)
 
52.83

Forfeited
(21,870
)
 
54.39

Balance at March 31, 2019
616,279

 
54.51

    
As of March 31, 2019, there was $23.1 million of total unrecognized compensation cost arising from restricted stock awards under the Company's 2010 Plan. 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 months ended March 31, 2019 and March 31, 2018 was $3.2 million and $1.3 million, respectively.
    

16


Performance Stock Awards

The following information relates to performance stock awards that have been granted to employees under the Company's 2010 Plan. 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 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 three months ended March 31, 2019:
Performance Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2019
213,490

 
$
55.71

Granted

 

Vested
(51,996
)
 
55.77

Forfeited
(14,120
)
 
55.69

Balance at March 31, 2019
147,374

 
55.69


As of March 31, 2019, there was $4.6 million of total unrecognized compensation cost arising from unvested performance stock awards deemed probable of vesting under the Company's 2010 Plan. The total fair value of performance awards vested during the three months ended March 31, 2019 and March 31, 2018 was $2.9 million and $0.5 million, respectively.
Common Stock Repurchases
The Company's board of directors has authorized the repurchase of up to $600 million of the Company's common stock. During the three months ended March 31, 2019 and March 31, 2018, the Company repurchased and retired a total of approximately 0.1 million and 0.3 million shares, respectively, of the Company's common stock for total costs of approximately $6.3 million and $14.3 million, respectively. Through March 31, 2019, the Company has repurchased and retired a total of approximately 5.7 million shares of its common stock for approximately $300.3 million under this program. As of March 31, 2019, an additional $299.7 million remained available for repurchase of shares under this 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 March 31, 2019 and December 31, 2018, the Company had recorded reserves of $23.8 million and $25.4 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 March 31, 2019 and December 31, 2018, the Company also believed that it was reasonably possible that the amount of these potential liabilities could be as much as $1.8 million more. 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 March 31, 2019 and December 31, 2018, the $23.8 million and $25.4 million, respectively, of reserves consisted of (i) $17.6 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) $6.2 million and $7.5

17


million, respectively, primarily related to federal, state and provincial enforcement actions, which were included in accrued expenses on the consolidated balance sheets.
As of March 31, 2019, the principal legal and administrative proceedings in which the Company was involved, or which had been terminated during 2019, 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 two permits to dump organic liquids into lagoons on the property to a company unrelated to the Mercier Subsidiary. 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 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, results of operations or cash flows.
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 March 31, 2019 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 67 proceedings (excluding cases which have been settled but not formally dismissed) as of March 31, 2019, 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 adequately warn 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 these claims. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, Safety-Kleen is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of March 31, 2019. From January 1, 2019 to March 31, 2019, seven product liability claims were settled or dismissed. Due to the nature of these claims and the related insurance, the Company did not incur any expense as Safety-Kleen's insurance provided coverage in full for all such claims. Safety-Kleen may be named in similar, additional lawsuits in the future, including claims for which insurance coverage may not be available.    
Superfund Proceedings
The Company has been notified that either the Company (which, since December 28, 2012, includes Safety-Kleen) or the prior owners of certain of the Company's facilities for which the Company may have certain indemnification obligations have been identified as potentially responsible parties ("PRPs") or potential PRPs in connection with 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

18


investigations, settlements and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability, if any, of the Company or the prior owners of certain of the Company's facilities to contribute a portion of the cleanup costs, the assumptions that must be made in calculating the estimated cost and timing of remediation, the identification of other PRPs and their respective capability and obligation to contribute to remediation efforts, and the existence and legal standing of indemnification agreements, if any, with prior owners, which may either benefit the Company or subject the Company to potential indemnification obligations. The Company believes its potential liability could exceed $100,000 at ten 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 U.S. 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. In 2018 the Company 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 two other entities, 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 March 31, 2019 and December 31, 2018, there were 11 and ten proceedings, respectively, 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.

19


(17) LEASES
As of March 31, 2019, the Company’s leases were all operating leases except for a single finance lease related to the Company’s corporate headquarters, which was amended during the first quarter of 2019, resulting in the classification as a finance lease.
The Company’s lease expense was as follows (in thousands):
 
For the Three Months Ended March 31, 2019
Operating lease cost
$
13,362

Finance lease cost
 
Amortization of ROU asset
245

Interest on lease liability
321

Total finance lease cost
566

Short-term lease cost
19,714

Variable lease cost
1,242

Total lease cost
$
34,884

Other information related to leases was as follows (in thousands, except lease term and discount rate):
Supplemental Lease Balance Sheet Information:
March 31, 2019
ROU assets
 
Operating leases
$
170,550

Finance lease (included in property, plant and equipment, net)
22,782

Current portion of lease liabilities
 
Operating leases
43,858

Finance lease (included in accrued expenses)
413

Long-term portion of lease liabilities
 
Operating leases
128,689

Finance lease (included in deferred taxes, unrecognized tax benefits and other long-term liabilities)
23,797

Weighted Average Remaining Lease Term (years)
March 31, 2019
Operating leases
5.3

Finance lease
23.3

Weighted Average Discount Rate
 
Operating leases
5.42
%
Finance lease
5.25
%

20


At March 31, 2019, our future lease payments under non-cancelable leases that have lease terms in excess of one year were as follows (in thousands):
Years Ending December 31,
Operating
Leases
 
Finance
Lease
2019 (nine months)
$
40,019

 
$
1,307

2020
44,558

 
1,777

2021
33,147

 
1,813

2022
26,081

 
1,849

2023
18,498

 
1,886

2024
12,525

 
1,923

Thereafter
26,037

 
40,636

Total future lease payments
200,865


51,191

Amount representing interest
(28,318
)
 
(26,981
)
Total lease liabilities
$
172,547


$
24,210

At March 31, 2019, none of our executed leases that had not yet commenced will create significant rights or obligations in the future and our sublease transactions are not material. Additionally, the Company does not have any related party leases and there were no restrictions or covenants imposed by its leases.
Disclosures related to periods prior to adoption of Topic 842
The following is a summary of future minimum payments under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at December 31, 2018 (in thousands):
Year
Total
Operating
Leases
2019
$
56,480

2020
45,467

2021
33,564

2022
24,509

2023
15,253

Thereafter
35,778

Total minimum lease payments
$
211,051

During the years ended December 31, 2018, 2017 and 2016, rent expense including short-term rentals was approximately $141.1 million, $125.4 million, and $121.9 million, respectively.
(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. The Company's operations are managed in two operating segments: Environmental Services and Safety-Kleen.
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 operations not managed through the Company’s operating segments described above are recorded as “Corporate Items.”

21


The following table reconciles third-party revenues to direct revenues for the three months ended March 31, 2019 and March 31, 2018 (in thousands):
 
For the Three Months Ended March 31, 2019
 
For the Three Months Ended March 31, 2018
 
Third-party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
 
Third-party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
Environmental Services
$
473,698

 
$
34,075

 
$
1,249

 
$
509,022

 
$
439,688

 
$
31,965

 
$
794

 
$
472,447

Safety-Kleen
306,547

 
(34,075
)
 
5

 
272,477

 
309,918

 
(31,965
)
 
11

 
277,964

Corporate Items
594

 

 
(1,254
)
 
(660
)
 
172

 

 
(805
)
 
(633
)
Total
$
780,839

 
$

 
$

 
$
780,839

 
$
749,778

 
$

 
$

 
$
749,778

The primary financial measure by which the Company evaluates the performance of its segments is "Adjusted EBITDA," which consists of net income (loss) plus accretion of environmental liabilities, depreciation and amortization, interest expense, net of interest income, provision for income taxes and other gains or non-cash charges not deemed representative of fundamental segment results and excludes other (income) 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
 
March 31,
 
2019
 
2018
Adjusted EBITDA:
 

 
 

Environmental Services
$
89,510

 
$
61,417

Safety-Kleen
54,793

 
61,884

Corporate Items
(42,640
)
 
(35,036
)
Total
101,663

 
88,265

Reconciliation to Consolidated Statements of Operations:
 

 
 

Accretion of environmental liabilities
2,574

 
2,430

Depreciation and amortization
75,355

 
74,844

Income from operations
23,734

 
10,991

Other (income) expense, net
(2,983
)
 
299

Interest expense, net of interest income
19,764

 
20,270

Income (loss) before provision for income taxes
$
6,953

 
$
(9,578
)

22


The following table presents certain assets by reportable segment and in the aggregate (in thousands):
 
March 31, 2019
 
December 31, 2018
Property, plant and equipment, net
 
 
 
Environmental Services
$
953,960

 
$
951,867

Safety-Kleen
561,041

 
553,220

Corporate Items
73,612

 
56,891

Total property, plant and equipment, net
$
1,588,613

 
$
1,561,978

 
 
 
 
Goodwill and Permits and other intangibles, net
 
 
 
Environmental Services
 
 
 
Goodwill
$
204,860

 
$
207,019

Permits and other intangibles, net
95,040

 
93,313

Total Environmental Services
299,900

 
300,332

 
 
 
 
Safety-Kleen
 
 
 
Goodwill
$
313,050

 
$
307,170

Permits and other intangibles, net
343,918

 
348,562

Total Safety-Kleen
656,968


655,732

 
 
 
 
Total
$
956,868

 
$
956,064

The following table presents the total assets by reportable segment (in thousands):
 
March 31, 2019
 
December 31, 2018
Environmental Services
$
1,724,208

 
$
1,640,706

Safety-Kleen
1,518,723

 
1,431,381

Corporate Items
639,123

 
666,234

Total
$
3,882,054

 
$
3,738,321

The following table presents the total assets by geographical area (in thousands):
 
March 31, 2019
 
December 31, 2018
United States
$
3,212,979

 
$
3,090,311

Canada
669,075

 
648,010

Total
$
3,882,054

 
$
3,738,321

(19) GUARANTOR AND NON-GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION
The 2021 Notes and the Company's obligations under its Term Loan Agreement are guaranteed by substantially all of the Company’s subsidiaries organized in the United States. Each guarantor is a 100% owned subsidiary of Clean Harbors, Inc. and its guarantee is both full and unconditional and joint and several. The guarantees are, however, subject to customary release provisions under which the guarantee of any domestic restricted subsidiary will be released if the Company sells such subsidiary to an unrelated third party in accordance with the terms of the indentures which govern the 2021 Notes and of the Term Loan Agreement. The 2021 Notes and the Company's obligations under its Term Loan Agreement are not guaranteed by the Company’s subsidiaries organized outside the United States. The following supplemental condensed consolidating financial information for the parent company, the guarantor subsidiaries and the non-guarantor subsidiaries, respectively, is presented in conformity with the requirements of Rule 3-10 of SEC Regulation S-X (“Rule 3-10”).


23


Following is the condensed consolidating balance sheet at March 31, 2019 (in thousands):
 
Clean
Harbors, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
27,431

 
$
75,099

 
$
64,841

 
$

 
$
167,371

Short-term marketable securities
121

 

 
57,356

 

 
57,477

Intercompany receivables
268,195

 
701,583

 
58,138

 
(1,027,916
)
 

Accounts receivable, net

 
526,047

 
87,460

 

 
613,507

Other current assets

 
281,802

 
44,525

 
(16,560
)
 
309,767

Property, plant and equipment, net

 
1,261,206

 
327,407

 

 
1,588,613

Investments in subsidiaries
3,176,613

 
566,296

 

 
(3,742,909
)
 

Intercompany debt receivable

 
14,900

 
21,000

 
(35,900
)
 

Operating lease right-of-use assets

 
137,591

 
32,959

 

 
170,550

Goodwill

 
459,139

 
58,771

 

 
517,910

Permits and other intangibles, net

 
390,838

 
48,120

 

 
438,958

Other long-term assets
1,437

 
13,530

 
2,903

 
31

 
17,901

Total assets
$
3,473,797

 
$
4,428,031

 
$
803,480

 
$
(4,823,254
)
 
$
3,882,054

Liabilities and Stockholders’ Equity:
 

 
 

 
 

 
 

 
 

Current liabilities
$
35,686

 
$
431,891

 
$
146,493

 
$
(16,560
)
 
$
597,510

Intercompany payables
702,141

 
325,025

 
750

 
(1,027,916
)
 

Closure, post-closure and remedial liabilities, net

 
147,944

 
17,524

 

 
165,468

Long-term obligations, net
1,564,005

 

 

 

 
1,564,005

Operating lease liabilities, less current portion

 
104,374

 
24,315

 

 
128,689

Intercompany debt payable

 
21,000

 
14,900

 
(35,900
)
 

Other long-term liabilities

 
233,979

 
20,407

 
31

 
254,417

Total liabilities
2,301,832

 
1,264,213

 
224,389

 
(1,080,345
)
 
2,710,089

Stockholders’ equity
1,171,965

 
3,163,818

 
579,091

 
(3,742,909
)
 
1,171,965

Total liabilities and stockholders’ equity
$
3,473,797

 
$
4,428,031

 
$
803,480

 
$
(4,823,254
)
 
$
3,882,054


24



Following is the condensed consolidating balance sheet at December 31, 2018 (in thousands):
 
Clean
Harbors, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
27,308

 
$
101,302

 
$
97,897

 
$

 
$
226,507

Short-term marketable securities
67

 

 
52,789

 

 
52,856

Intercompany receivables
262,475

 
721,521

 
60,693

 
(1,044,689
)
 

Accounts receivable, net

 
520,785

 
86,167