CLEAN HARBORS INC [CLH] Filings

10-Q 1 clh-20240630.htm 10-Q clh-20240630

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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

JUNE 30, 2024

☐

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 “merging 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 July 26, 2024 was 53,972,593.

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			6

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			22

ITEM 3: Quantitative and Qualitative Disclosures About Market Risk			33

ITEM 4: Controls and Procedures			34

PART II: OTHER INFORMATION

ITEM 1: Legal Proceedings			35
ITEM 1A: Risk Factors			35
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds			35
ITEM 3: Defaults Upon Senior Securities			35
ITEM 4: Mine Safety Disclosures			35
ITEM 5: Other Information			36
ITEM 6: Exhibits			36
Signatures			37

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CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)


	June 30, 2024		December 31, 2023
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	401,992	$	444,698
Short-term marketable securities	91,294		106,101
Accounts receivable, net of allowances aggregating $50,639 and $42,209, respectively	1,089,832		983,111
Unbilled accounts receivable	187,148		107,859
Inventories and supplies	365,356		327,511
Prepaid expenses and other current assets	93,440		82,939
Total current assets	2,229,062		2,052,219
Property, plant and equipment, net	2,408,647		2,193,318
Other assets:
Operating lease right-of-use assets	214,858		187,060
Goodwill	1,482,085		1,287,736
Permits and other intangibles, net	727,463		602,797
Other long-term assets	74,833		59,739
Total other assets	2,499,239		2,137,332
Total assets	$	7,136,948	$	6,382,869

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	15,102	$	10,000
Accounts payable	447,940		451,806
Deferred revenue	108,035		95,230
Accrued expenses and other current liabilities	392,708		397,157
Current portion of closure, post-closure and remedial liabilities	31,954		26,914
Current portion of operating lease liabilities	65,901		56,430
Total current liabilities	1,061,640		1,037,537
Other liabilities:
Closure and post-closure liabilities, less current portion of $15,813 and $13,556, respectively	103,299		105,044
Remedial liabilities, less current portion of $16,141 and $13,358, respectively	95,458		97,885
Long-term debt, less current portion	2,775,837		2,291,717
Operating lease liabilities, less current portion	152,328		131,743
Deferred tax liabilities	360,861		353,107
Other long-term liabilities	145,804		118,330
Total other liabilities	3,633,587		3,097,826
Commitments and contingent liabilities (See Note 15)
Stockholders’ equity:
Common stock, $0.01 par value:
Authorized 80,000,000 shares; issued and outstanding 53,930,201 and 53,929,703 shares, respectively	539		539

Additional paid-in capital	459,982		459,728
Accumulated other comprehensive loss	(184,490)		(175,339)
Retained earnings	2,165,690		1,962,578
Total stockholders’ equity	2,441,721		2,247,506
Total liabilities and stockholders’ equity	$	7,136,948	$	6,382,869

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

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenues:
Service revenues	$	1,288,370	$	1,159,090	$	2,440,228	$	2,212,323
Product revenues	264,349		238,810		489,186		492,964
Total revenues	1,552,719		1,397,900		2,929,414		2,705,287
Cost of revenues: (exclusive of items shown separately below)
Service revenues	850,391		771,600		1,666,740		1,523,195
Product revenues	185,151		175,912		339,872		355,831
Total cost of revenues	1,035,542		947,512		2,006,612		1,879,026
Selling, general and administrative expenses	197,876		167,382		379,744		334,135
Accretion of environmental liabilities	3,304		3,486		6,521		6,893
Depreciation and amortization	100,504		89,697		195,569		174,455

Income from operations	215,493		189,823		340,968		310,778
Other expense, net	(167)		(1,283)		(1,308)		(1,167)
Loss on early extinguishment of debt	—		—		—		(2,362)

Interest expense, net of interest income of $4,352, $2,001, $7,866, and $4,956, respectively	(36,449)		(30,072)		(64,988)		(50,704)
Income before provision for income taxes	178,877		158,468		274,672		256,545
Provision for income taxes	45,597		42,702		71,560		68,378
Net income	$	133,280	$	115,766	$	203,112	$	188,167
Earnings per share:
Basic	$	2.47	$	2.14	$	3.77	$	3.48
Diluted	$	2.46	$	2.13	$	3.75	$	3.46
Shares used to compute earnings per share - Basic	53,932		54,092		53,931		54,084
Shares used to compute earnings per share - Diluted	54,248		54,448		54,231		54,422

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				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net income	$	133,280	$	115,766	$	203,112	$	188,167
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on available-for-sale securities	(8)		44		(92)		218
Unrealized gain on fair value of interest rate hedges	3,106		12,556		11,767		7,727
Reclassification adjustment for interest rate hedge amounts realized in net income	(3,721)		(4,930)		(7,454)		(9,054)
Reclassification adjustment for settlement of interest rate hedges	—		—		—		(5,905)

Pension adjustments	9		(7)		28		(7)
Foreign currency translation adjustments	(4,250)		7,898		(13,400)		8,236
Other comprehensive (loss) income, net of tax	(4,864)		15,561		(9,151)		1,215
Comprehensive income	$	128,416	$	131,327	$	193,961	$	189,382

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

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended
	June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	203,112	$	188,167
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	195,569		174,455
Allowance for doubtful accounts	4,349		1,209
Amortization of deferred financing costs and debt discount	2,937		2,718
Accretion of environmental liabilities	6,521		6,893
Changes in environmental liability estimates	3,963		387
Deferred income taxes	(88)		(356)
Other expense, net	1,308		1,167
Stock-based compensation	14,853		10,518
Loss on early extinguishment of debt	—		2,362

Environmental expenditures	(9,934)		(16,323)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable and unbilled accounts receivable	(116,307)		(5,659)
Inventories and supplies	(28,673)		(1,111)
Other current and long-term assets	(28,870)		(22,749)
Accounts payable	(12,418)		(78,139)
Other current and long-term liabilities	(1,728)		(27,966)
Net cash from operating activities	234,594		235,573
Cash flows used in investing activities:
Additions to property, plant and equipment	(273,023)		(204,298)
Proceeds from sale and disposal of fixed assets	4,295		2,944
Acquisitions, net of cash acquired	(477,201)		(120,636)
Proceeds from sale of business	750		—
Additions to intangible assets including costs to obtain or renew permits	(1,868)		(1,114)
Purchases of available-for-sale securities	(55,318)		(74,451)
Proceeds from sale of available-for-sale securities	71,695		50,290
Net cash used in investing activities	(730,670)		(347,265)
Cash flows from (used in) financing activities:
Change in uncashed checks	(1,868)		2,392
Tax payments related to withholdings on vested restricted stock	(4,599)		(4,335)
Repurchases of common stock	(10,215)		(8,001)
Deferred financing costs paid	(8,148)		(6,346)

Payments on finance leases	(11,491)		(7,588)
Principal payments on debt	(7,551)		(618,975)
Proceeds from issuance of debt, net of discount	499,375		500,000
Borrowing from revolving credit facility	—		114,000
Payment on revolving credit facility	—		(114,000)
Net cash from (used in) financing activities	455,503		(142,853)
Effect of exchange rate change on cash	(2,133)		718
Decrease in cash and cash equivalents	(42,706)		(253,827)
Cash and cash equivalents, beginning of period	444,698		492,603
Cash and cash equivalents, end of period	$	401,992	$	238,776
Supplemental information:
Cash payments for interest and income taxes:
Interest paid	$	74,079	$	49,257
Income taxes paid, net of refunds	70,307		92,494
Non-cash investing activities:
Property, plant and equipment accrued	28,315		26,427

ROU assets obtained in exchange for operating lease liabilities	49,420		38,474
ROU assets obtained in exchange for finance lease liabilities	45,174		13,992

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					Retained Earnings			Total Stockholders’ Equity
Balance at January 1, 2024	53,930	$	539		$	459,728	$	(175,339)		$	1,962,578		$	2,247,506
Net income	—	—			—		—			69,832			69,832
Other comprehensive loss	—	—			—		(4,287)			—			(4,287)
Stock-based compensation	—	—			6,338		—			—			6,338
Issuance of common stock for restricted share vesting, net of employee tax withholdings	23	—			(3,052)		—			—			(3,052)
Repurchases of common stock	(27)	—			(5,000)		—			—			(5,000)
Balance at March 31, 2024	53,926	539			458,014		(179,626)			2,032,410			2,311,337
Net income	—	—			—		—			133,280			133,280
Other comprehensive loss	—	—			—		(4,864)			—			(4,864)
Stock-based compensation	—	—			8,515		—			—			8,515
Issuance of common stock for restricted share vesting, net of employee tax withholdings	27	—			(1,547)		—			—			(1,547)
Repurchases of common stock	(23)	—			(5,000)		—			—			(5,000)












Balance at June 30, 2024	53,930	$	539		$	459,982	$	(184,490)		$	2,165,690		$	2,441,721


	Common Stock						Accumulated Other Comprehensive Loss
	Number of Shares	$0.01 Par Value		Additional Paid-in Capital					Retained 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

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 (“SEC”) 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, 2023.

(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, 2023.

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance will be effective for the Company’s annual period beginning January 1, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The requirements of this ASU are disclosure related and will not have an impact on the Company’s financial condition, results of operations, or cash flows. The Company is currently evaluating the impact of adopting this ASU on its reportable segment disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances income tax disclosures related to the tax rate reconciliation and income taxes paid. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The requirements of this ASU are disclosure related and will not have an impact on the Company’s financial condition, results of operations, or cash flows. The Company is currently evaluating the impact of adopting this ASU on its income tax disclosures.

In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. The rules require disclosure of, among other things: material climate-related risks; activities to mitigate or adapt to such risks; governance and management of such risks; and material Scope 1 and Scope 2 greenhouse gas emissions. Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. The rules will become effective on a phased-in timeline beginning with the year ended December 31, 2025. On April 4, 2024, the SEC voluntarily stayed implementation of the final rule to facilitate the orderly judicial resolution of pending legal challenges to the rule. The Company is currently evaluating the final rule to determine its impact on the Company’s consolidated financial statements and disclosures.

(3) REVENUES

The Company generates revenues through the following operating segments: Environmental Services and Safety-Kleen Sustainability Solutions (“SKSS”). The Company’s Environmental Services operating segment generally has four sources of revenue and the SKSS 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 remediation projects. These services handle hazardous and/or non-hazardous waste, including per- and polyfluoroalkyl substances

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(“PFAS”). 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.

Industrial Services—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 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, environmental remediation, railcar cleaning, manhole/vault clean outs, product recovery and transfer and vacuum services. Additional services include filtration, water treatment services and wetland restoration. 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 SKSS 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 SKSS 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

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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 SKSS 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.

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


	Three Months Ended June 30, 2024
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	1,175,328	$	232,789	$	99	$	1,408,216
Canada	121,970		22,533		—		144,503
Total third-party revenues	$	1,297,298	$	255,322	$	99	$	1,552,719

Sources of Revenue
Technical Services	$	443,668	$	—	$	—	$	443,668
Industrial Services and Other	359,471		—		99		359,570
Field and Emergency Response Services	252,893		—		—		252,893
Safety-Kleen Environmental Services	241,266		58,421		—		299,687
Safety-Kleen Oil	—		196,901		—		196,901
Total third-party revenues	$	1,297,298	$	255,322	$	99	$	1,552,719


	Three Months Ended June 30, 2023
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	1,041,739	$	212,994	$	116	$	1,254,849
Canada	119,743		23,308		—		143,051
Total third-party revenues	$	1,161,482	$	236,302	$	116	$	1,397,900

Sources of Revenue
Technical Services	$	389,908	$	—	$	—	$	389,908
Industrial Services and Other	399,545		—		116		399,661
Field and Emergency Response Services	154,359		—		—		154,359
Safety-Kleen Environmental Services	217,670		62,452		—		280,122
Safety-Kleen Oil	—		173,850		—		173,850
Total third-party revenues	$	1,161,482	$	236,302	$	116	$	1,397,900

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	Six Months Ended June 30, 2024
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	2,228,786	$	426,701	$	201	$	2,655,688
Canada	229,791		43,935		—		273,726
Total third-party revenues	$	2,458,577	$	470,636	$	201	$	2,929,414

Sources of Revenue
Technical Services	$	851,159	$	—	$	—	$	851,159
Industrial Services and Other	718,868		—		201		719,069
Field and Emergency Response Services	416,362		—		—		416,362
Safety-Kleen Environmental Services	472,188		111,442		—		583,630
Safety-Kleen Oil	—		359,194		—		359,194
Total third-party revenues	$	2,458,577	$	470,636	$	201	$	2,929,414


	Six Months Ended June 30, 2023
	Environmental Services		Safety-Kleen Sustainability Solutions		Corporate		Total
Primary Geographical Markets
United States	$	2,000,323	$	434,765	$	223	$	2,435,311
Canada	222,141		47,835		—		269,976
Total third-party revenues	$	2,222,464	$	482,600	$	223	$	2,705,287

Sources of Revenue
Technical Services	$	756,417	$	—	$	—	$	756,417
Industrial Services and Other	735,924		—		223		736,147
Field and Emergency Response Services	302,445		—		—		302,445
Safety-Kleen Environmental Services	427,678		112,011		—		539,689
Safety-Kleen Oil	—		370,589		—		370,589
Total third-party revenues	$	2,222,464	$	482,600	$	223	$	2,705,287

Contract Balances


(in thousands)	June 30, 2024		December 31, 2023
Receivables	$	1,089,832	$	983,111
Contract assets (unbilled receivables)	187,148		107,859
Contract liabilities (deferred revenue)	108,035		95,230

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 are generally fully recognized in the subsequent three-month period.

(4) BUSINESS COMBINATIONS

2024 Acquisitions

On March 22, 2024, the Company completed its acquisition of Hepaco Blocker, Inc. and its subsidiaries (collectively, “HEPACO”) for an all-cash purchase price of $395.6 million, net of cash acquired and subject to final settlement of working capital balances. The operations of HEPACO expand the Environmental Services segment’s field services business.

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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 March 22, 2024. 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 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, 2024		Measurement Period Adjustments		At Acquisition Date As Reported June 30, 2024
Accounts receivable, including unbilled receivables	$	68,496	$	3,427	$	71,923
Inventories and supplies	1,574		(1,028)		546
Prepaid expenses and other current assets	5,221		(94)		5,127
Property, plant and equipment	45,453		—		45,453
Permits and other intangibles	130,000		500		130,500
Operating lease right-of-use assets	9,385		—		9,385
Other long-term assets	2,660		—		2,660
Accrued expenses and other current liabilities	(43,966)		(1,096)		(45,062)
Current portion of operating lease liabilities	(2,758)		—		(2,758)
Operating lease liabilities, less current portion	(6,627)		—		(6,627)
Deferred tax liabilities	(8,916)		—		(8,916)
Other long-term liabilities	(374)		—		(374)
Total identifiable net assets	200,148		1,709		201,857
Goodwill	195,265		(1,553)		193,712
Total purchase price	$	395,413	$	156	$	395,569

Other intangible assets acquired include customer relationships and trademarks/tradenames and are anticipated to have estimated useful lives of between 7 and 20 years with a weighted average useful life of approximately 19 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 not deductible for tax purposes.

The operations included in the Company’s financial statements for the period ended June 30, 2024, and pro forma revenue and earnings amounts on a combined basis as if this acquisition had been completed on January 1, 2023 are immaterial to the unaudited consolidated financial statements of the Company.

On March 1, 2024, the Company acquired Noble Oil Services, Inc and its subsidiaries (collectively, “Noble Oil”) for an all-cash purchase price of $68.7 million, net of cash acquired. The Company settled working capital for this acquisition in the second quarter of 2024 and adjusted the purchase price accordingly. The acquisition of Noble Oil expands the SKSS segment’s oil collection operations in the southeastern region of the United States while also adding incremental production from the re-refinery owned and operated by the acquired company.

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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 March 1, 2024. 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 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, 2024		Measurement Period Adjustments		At Acquisition Date As Reported June 30, 2024
Accounts receivable, including unbilled receivables	5,693		141		5,834
Inventories and supplies	6,817		(219)		6,598
Prepaid expenses and other current assets	423		(16)		407
Property, plant and equipment	38,914		3,514		42,428
Permits and other intangibles	20,200		—		20,200
Operating lease right-of-use assets	3,615		—		3,615
Other long-term assets	92		—		92
Accrued expenses and other current liabilities	(8,990)		96		(8,894)
Current portion of operating lease liabilities	(1,823)		—		(1,823)
Operating lease liabilities, less current portion	(1,792)		—		(1,792)


Total identifiable net assets	63,149		3,516		66,665
Goodwill	5,744		(3,667)		2,077
Total purchase price	$	68,893	$	(151)	$	68,742

Other intangible assets acquired include customer relationships and trademarks/tradenames and are anticipated to have estimated useful lives of between 7 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 and assembled workforce that the Company expects to realize from the acquisition. Goodwill generated from the acquisition is deductible for tax purposes.

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. The operations of Thompson Industrial expand the Environmental Services segment’s industrial service operations in the southeastern region of the United States.

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The Company finalized the purchase accounting for this acquisition in the first quarter of 2024. The allocation of the purchase price was based on estimates of the fair value and assets acquired and liabilities assumed as of March 31, 2023. The following table summarizes the final determination and recognition of assets acquired and liabilities assumed (in thousands):


	At Acquisition Date As Reported December 31, 2023		Measurement Period Adjustments		Final Allocation As Reported June 30, 2024
Accounts receivable, including unbilled receivables	$	25,233	$	(73)	$	25,160
Inventories and supplies	228		—		228
Prepaid expenses and other current assets	1,302		—		1,302
Property, plant and equipment	26,719		—		26,719
Permits and other intangibles	28,900		—		28,900
Operating lease right-of-use assets	4,716		—		4,716
Other long-term assets	72		—		72
Accrued expenses and other current liabilities	(10,385)		(145)		(10,530)
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	71,509		(218)		71,291
Goodwill	39,346		218		39,564
Total purchase price	$	110,855	$	—	$	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.

(5) INVENTORIES AND SUPPLIES

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


	June 30, 2024		December 31, 2023
Supplies	$	193,226	$	177,217
Oil and oil related products	139,870		118,600
Solvent and solutions	13,679		11,795
Other	18,581		19,899
Total inventories and supplies	$	365,356	$	327,511

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.

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(6) PROPERTY, PLANT AND EQUIPMENT

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


	June 30, 2024		December 31, 2023
Land	$	184,045	$	174,891
Asset retirement costs (non-landfill)	27,127		27,167
Landfill assets	253,401		253,180
Buildings and improvements (1)	647,529		630,525

Vehicles (2)	1,396,240		1,276,567
Equipment (3)	2,436,769		2,388,370

Construction in progress	288,007		213,601
	5,233,118		4,964,301
Less - accumulated depreciation and amortization	2,824,471		2,770,983
Total property, plant and equipment, net	$	2,408,647	$	2,193,318

________________

(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 $205.8 million and $151.7 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 $86.5 million and $168.7 million for the three and six months ended June 30, 2024, respectively. Depreciation expense, inclusive of landfill and finance lease amortization, was $77.2 million and $149.2 million for the three and six months ended June 30, 2023, respectively. The Company recorded $2.9 million and $5.3 million of capitalized interest during the three and six months ended June 30, 2024, respectively. The Company recorded $1.4 million and $2.7 million of capitalized interest during the three and six months ended June 30, 2023, respectively. Capitalized interest in the periods presented is primarily attributable to the construction of a new incinerator in Kimball, Nebraska.

(7) GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in goodwill by segment for the six months ended June 30, 2024 were as follows (in thousands):


	Environmental Services		Safety-Kleen Sustainability Solutions		Totals
Balance at January 1, 2024	$	1,112,013	$	175,723	$	1,287,736
Increase from current period acquisitions	193,712		2,077		195,789
Measurement period adjustments from prior period acquisitions	218		—		218

Foreign currency translation	(1,181)		(477)		(1,658)
Balance at June 30, 2024	$	1,304,762	$	177,323	$	1,482,085

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 June 30, 2024, no such triggering events were identified.

As of June 30, 2024 and December 31, 2023, the Company’s intangible assets consisted of the following (in thousands):


	June 30, 2024						December 31, 2023
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Permits	$	192,138	$	121,085	$	71,053	$	191,747	$	117,556	$	74,191
Customer and supplier relationships	706,721		244,082		462,639		604,994		258,879		346,115
Other intangible assets	114,078		40,281		73,797		100,068		37,862		62,206
Total amortizable permits and other intangible assets	1,012,937		405,448		607,489		896,809		414,297		482,512
Trademarks and trade names	119,974		—		119,974		120,285		—		120,285
Total permits and other intangible assets	$	1,132,911	$	405,448	$	727,463	$	1,017,094	$	414,297	$	602,797

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Amortization expense of permits, customer and supplier relationships and other intangible assets was $14.0 million and $26.9 million in the three and six months ended June 30, 2024, respectively. Amortization expense of permits, customer and supplier relationships and other intangible assets was $12.5 million and $25.2 million in the three and six months ended June 30, 2023, respectively.

The expected amortization of the net carrying amount of finite-lived intangible assets at June 30, 2024 was as follows (in thousands):


Years Ending December 31,	Expected Amortization
2024 (six months)	$	27,418
2025	52,546
2026	50,657
2027	48,576
2028	47,260
Thereafter	381,032
	$	607,489

(8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


	June 30, 2024		December 31, 2023
Accrued insurance	$	102,754	$	107,658
Accrued compensation and benefits	101,056		113,236
Accrued income, real estate, sales and other taxes	51,163		44,752

Accrued interest	33,655		33,857
Accrued other	104,080		97,654
	$	392,708	$	397,157

(9) CLOSURE AND POST-CLOSURE LIABILITIES

The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) from January 1, 2024 through June 30, 2024 were as follows (in thousands):


	Landfill Retirement Liability		Non-Landfill Retirement Liability		Total
Balance at January 1, 2024	$	59,443	$	59,157	$	118,600


New asset retirement obligations	947		—		947

Accretion	2,415		2,185		4,600
Changes in estimates recorded to consolidated statement of operations	—		(182)		(182)
Changes in estimates recorded to consolidated balance sheet	46		51		97
Expenditures	(2,701)		(1,963)		(4,664)
Currency translation and other	(160)		(126)		(286)
Balance at June 30, 2024	$	59,990	$	59,122	$	119,112

In the six months ended June 30, 2024, there were no significant benefits or charges resulting from changes in estimates for closure and post-closure liabilities.

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(10) REMEDIAL LIABILITIES

The changes to remedial liabilities from January 1, 2024 through June 30, 2024 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, 2024	$	1,880	$	60,277	$	49,086	$	111,243


Accretion	44		1,134		743		1,921
Changes in estimates recorded to consolidated statement of operations	15		713		3,417		4,145
Expenditures	(26)		(1,801)		(3,443)		(5,270)
Currency translation and other	—		(9)		(431)		(440)
Balance at June 30, 2024	$	1,913	$	60,314	$	49,372	$	111,599

In the six months ended June 30, 2024, changes in estimates for remedial liabilities included a $2.9 million reserve increase related to new information on the ultimate remediation of an existing Superfund site.

(11) 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:	June 30, 2024		December 31, 2023
Secured senior term loans	$	15,102	$	10,000

Long-Term Debt:

Secured senior term loans due October 8, 2028	1,457,347		970,000
Unsecured senior notes, at 4.875%, due July 15, 2027 (“2027 Notes”)	545,000		545,000
Unsecured senior notes, at 5.125%, due July 15, 2029 (“2029 Notes”)	300,000		300,000
Unsecured senior notes, at 6.375%, due February 1, 2031 (“2031 Notes”)	500,000		500,000

Long-term debt, at par	$	2,802,347	$	2,315,000
Unamortized debt issuance costs and discount	(26,510)		(23,283)
Long-term debt, at carrying value	$	2,775,837	$	2,291,717

Financing Activities

The Company’s significant financing arrangements are described in Note 12, “Financing Arrangements,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and, other than as noted below, there have been no material changes to the arrangements described therein.

On June 28, 2024, the Company and one of the Company’s Canadian subsidiaries (the “Canadian Borrower”) entered into a seventh amended and restated credit agreement (the “Amended Credit Agreement”) with Bank of America, N.A. (“BofA”), as administrative agent, and the lenders party to the Amended Credit Agreement. The Amended Credit Agreement amends and restates the sixth amended and restated credit agreement dated October 28, 2020 (the “Prior Credit Agreement”).

Under the Amended Credit Agreement, the Company has the right to obtain revolving loans and letters of credit for a combined maximum of up to $550.0 million (with a sub-limit of $250.0 million for letters of credit) and the Canadian Borrower has the right to obtain revolving loans and letters of credit for a combined maximum of up to $50.0 million. The maximum borrowing amount of $600.0 million under the Amended Credit Agreement, increased from $400.0 million under the Prior Credit Agreement.

Borrowings by the Company under the Amended Credit Agreement will bear interest at the Company’s option, at either (i) the sum of Term SOFR plus a SOFR Adjustment of 0.1% plus 1.5% per annum, or (ii) the U.S. Base Rate, plus 0.5% per annum, and borrowings by the Canadian Borrower will bear interest, at the Company’s option, at either (i) the sum of Term CORRA plus a Term CORRA adjustment of either 0.29547% or 0.32138% for the one or three month interest period respectively, plus 1.5% per annum, (ii) the Canadian Prime Rate, plus 0.5% per annum, or (iii) the Canadian Base Rate, plus 0.5% per annum, as those terms are defined

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in the Amended Credit Agreement. Other terms under the Amended Credit Agreement are substantially the same as under the Prior Credit Agreement. Subject to certain customary conditions, the facility will expire on June 28, 2029.

The Company had no outstanding loan balance as of the under the Amended Credit Agreement as of the date of the amendment discussed above, June 30, 2024 or December 31, 2023. As of June 30, 2024, the Company had $463.5 million available to borrow under the revolving credit facility and outstanding letters of credit were $136.5 million.

On March 22, 2024, the Company and substantially all of the Company’s domestic subsidiaries entered into Incremental Facility Amendment No. 5 to the Company’s existing Credit Agreement, dated as of June 30, 2017 (“Term Loan Agreement”). Incremental Facility Amendment No. 5 provided for the incurrence of additional term loans (the “2024 Incremental Term Loans”) under the Term Loan Agreement in the aggregate principal amount of $500.0 million. Proceeds from the issuance of the 2024 Incremental Term Loans were $491.2 million after debt discount and debt issuance costs, and were used to fund the acquisition of HEPACO, with the excess increasing the Company’s cash balances. The 2024 Incremental Term Loans are in addition to the aggregate of $980.0 million of term loans (the “Existing Term Loans”) which were outstanding prior to the issuance of the 2024 Incremental Term Loans. Both the 2024 Incremental Term Loans and the Existing Term Loans (collectively referred to as the “2028 Term Loans”) will mature on October 8, 2028, and may be prepaid at any time without premium or penalty other than customary breakage costs or if the Company engages in certain repricing transactions before September 22, 2024, in which event a 1.0% prepayment premium would be due. The Company’s obligations under the 2028 Term Loans are guaranteed by substantially all of the Company’s domestic restricted subsidiaries and secured by liens on substantially all of the assets of the Company and the guarantors.

The 2028 Term Loans bear interest, at the Company’s election, at either of the following rates: (a) the sum of the Term SOFR Rate (as defined in the Term Loan Agreement) plus 0.11448% (the one-month Term SOFR adjustment) plus a 1.75% margin per annum, or (b) the sum of the Base Rate (as defined in the Term Loan Agreement) plus 0.75% margin per annum. The Term SOFR rate is subject to a floor of 0.00% and the Base Rate is subject to a floor of 1.00%. The Company has elected one-month Term SOFR for interest payments on that debt; however, the Term Loan Agreement provides for Term SOFR adjustments for other interest periods. Interest on the 2028 Term Loans is paid monthly with interest payments on the 2024 Incremental Term Loan portion commencing in April 2024.

As of June 30, 2024 and December 31, 2023, the estimated fair value of the Company’s outstanding long-term debt, including the current portion, was $2.8 billion and $2.3 billion, respectively. The Company’s estimates of fair value of its long-term debt, including the current portion, are based on quoted market prices or other available market data which are considered Level 2 measures according to the fair value hierarchy. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotation or alternative pricing sources with reasonable levels of price transparency for similar assets and liabilities.

As of June 30, 2024, after taking into account the interest rate swaps discussed under the “Cash Flow Hedges” header below, the Company’s variable rate debt consisted of $872.4 million of the 2028 Term Loans. The Company’s interest rate on this variable rate debt as of June 30, 2024 was 7.19%.

Cash Flow Hedges

The Company’s strategy to hedge against fluctuations in variable interest rates involves entering into interest rate derivative agreements.

The Company has entered into interest rate swap agreements with a notional amount of $600.0 million (“2022 Swaps”) to effectively fix the interest rate on $600.0 million principal of the outstanding Existing Term Loans. The fixed rate on these instruments is 1.9645% and the variable rate is linked to the Term SOFR to mirror the variable interest payments for the Existing Term Loans. Including the 1.75% interest rate margin and the 0.11448% SOFR adjustment for the Existing Term Loans, the effective annual interest rate of this $600.0 million of principal debt is approximately 3.83%. Prior to the phase-out of LIBOR as a referenced rate on June 30, 2023, the fixed rate was 0.931% and the variable rate was linked to LIBOR, again to mirror the LIBOR linked variable interest payments for the Existing Term Loans. With the then 2.00% interest rate margin for the Existing Term Loans, the effective annual interest rate of the $600.0 million of principal debt was 2.931% through June 30, 2023. The 2022 Swaps will expire on September 30, 2027.