Document
Table of Contents

UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017
OR
 
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM         TO       

Commission File Number 001-34223
_______________________
CLEAN HARBORS, INC.
(Exact name of registrant as specified in its charter)
Massachusetts
 
04-2997780
(State or Other Jurisdiction of Incorporation or Organization)
 
(IRS Employer Identification No.)
42 Longwater Drive, Norwell, MA
 
02061-9149
(Address of Principal Executive Offices)
 
(Zip Code)
(781) 792-5000
(Registrant’s Telephone Number, Including area code)
_______________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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
(Do not check if a smaller reporting company)
 
Emerging growth company o

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value
 
56,933,498
(Class)
 
(Outstanding as of October 27, 2017)



CLEAN HARBORS, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents



CLEAN HARBORS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

 
September 30, 2017
 
December 31, 2016
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
361,658

 
$
306,997

Accounts receivable, net of allowances aggregating $28,537 and $29,249, respectively
531,696

 
496,226

Unbilled accounts receivable
40,933

 
36,190

Deferred costs
20,237

 
18,914

Inventories and supplies
173,097

 
178,428

Prepaid expenses and other current assets
32,637

 
56,116

Total current assets
1,160,258

 
1,092,871

Property, plant and equipment, net
1,611,971

 
1,611,827

Other assets:
 
 
 
Goodwill
478,728

 
465,154

Permits and other intangibles, net
477,639

 
498,721

Other
19,757

 
13,347

Total other assets
976,124

 
977,222

Total assets
$
3,748,353

 
$
3,681,920

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term obligations
$
4,000

 
$

Accounts payable
223,599

 
229,534

Deferred revenue
69,236

 
64,397

Accrued expenses
213,189

 
190,721

Current portion of closure, post-closure and remedial liabilities
19,516

 
20,016

Total current liabilities
529,540

 
504,668

Other liabilities:
 
 
 
Closure and post-closure liabilities, less current portion of $4,077 and $6,220, respectively
55,762

 
52,111

Remedial liabilities, less current portion of $15,439 and $13,796, respectively
110,074

 
114,211

Long-term obligations, less current portion
1,625,971

 
1,633,272

Deferred taxes, unrecognized tax benefits and other long-term liabilities
298,659

 
293,417

Total other liabilities
2,090,466

 
2,093,011

Commitments and contingent liabilities (See Note 15)


 


Stockholders’ equity:
 
 
 
Common stock, $.01 par value:
 
 
 
Authorized 80,000,000; shares issued and outstanding 56,926,549 and 57,297,978 shares, respectively
569

 
573

Shares held under employee participation plan

 
(469
)
Additional paid-in capital
708,358

 
725,670

Accumulated other comprehensive loss
(169,468
)
 
(214,326
)
Accumulated earnings
588,888

 
572,793

Total stockholders’ equity
1,128,347

 
1,084,241

Total liabilities and stockholders’ equity
$
3,748,353

 
$
3,681,920

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

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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Service revenues
$
612,352

 
$
594,225

 
$
1,783,506

 
$
1,709,018

Product revenues
143,494

 
135,295

 
414,069

 
354,095

Total revenues
755,846

 
729,520

 
2,197,575

 
2,063,113

Cost of revenues (exclusive of items shown separately below)
 
 
 
 
 
 
 
Service revenues
412,369

 
385,542

 
1,215,812

 
1,148,212

Product revenues
107,226

 
106,373

 
320,171

 
287,984

Total cost of revenues
519,595

 
491,915

 
1,535,983

 
1,436,196

Selling, general and administrative expenses
113,252

 
110,954

 
337,767

 
322,501

Accretion of environmental liabilities
2,347

 
2,476

 
7,053

 
7,529

Depreciation and amortization
72,989

 
73,360

 
216,932

 
215,655

Goodwill impairment charge

 
34,013

 

 
34,013

Income from operations
47,663

 
16,802

 
99,840

 
47,219

Other expense
(432
)
 
(198
)
 
(2,814
)
 
(737
)
Loss on early extinguishment of debt
(1,846
)
 

 
(7,891
)
 

(Loss) gain on sale of businesses
(77
)
 
16,431

 
31,645

 
16,431

Interest expense, net of interest income of $573, $196, $1,098 and $571, respectively
(20,675
)
 
(21,565
)
 
(65,743
)
 
(62,192
)
Income before provision for income taxes
24,633

 
11,470

 
55,037

 
721

Provision for income taxes
12,575

 
21,725

 
38,492

 
27,881

Net income (loss)
$
12,058

 
$
(10,255
)
 
$
16,545

 
$
(27,160
)
Earnings (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.21

 
$
(0.18
)
 
$
0.29

 
$
(0.47
)
Diluted
$
0.21

 
$
(0.18
)
 
$
0.29

 
$
(0.47
)
Shares used to compute earnings (loss) per share - Basic
57,033

 
57,487

 
57,149

 
57,575

Shares used to compute earnings (loss) per share - Diluted
57,195

 
57,487

 
57,280

 
57,575


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 (LOSS)

(in thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Net income (loss)
$
12,058

 
$
(10,255
)
 
$
16,545

 
$
(27,160
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized gains (losses) on available-for-sale securities (net of tax (benefit) of $7, $(238), $129 and $(238), respectively)
11

 
(164
)
 
170

 
(358
)
Reclassification adjustment for losses on available-for-sale securities included in net income (loss) (net of taxes of $0, $0, $79 and $0, respectively)

 

 
143

 

Foreign currency translation adjustments
23,698

 
(1,147
)
 
44,545

 
43,706

Other comprehensive income (loss)
23,709

 
(1,311
)
 
44,858

 
43,348

Comprehensive income (loss)
$
35,767

 
$
(11,566
)
 
$
61,403

 
$
16,188


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


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CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Nine Months Ended
 
September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income (loss)
$
16,545

 
$
(27,160
)
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Depreciation and amortization
216,932

 
215,655

Goodwill impairment charge

 
34,013

Allowance for doubtful accounts
5,635

 
6,203

Amortization of deferred financing costs and debt discount
2,562

 
2,685

Accretion of environmental liabilities
7,053

 
7,529

Changes in environmental liability estimates
(312
)
 
(349
)
Deferred income taxes
184

 
(28,826
)
Stock-based compensation
9,212

 
7,735

Excess tax benefit of stock-based compensation

 
(21
)
Net tax deficiency on stock based awards

 
(642
)
Other expense
2,814

 
1,247

Gain on sale of business
(31,645
)
 
(16,431
)
Loss on early extinguishment of debt
7,891

 

Environmental expenditures
(10,078
)
 
(9,374
)
Changes in assets and liabilities, net of acquisitions
 
 
 
Accounts receivable and unbilled accounts receivable
(38,122
)
 
(32,944
)
Inventories and supplies
(4,975
)
 
(13,722
)
Other current assets
18,305

 
5,619

Accounts payable
(7,085
)
 
(11,951
)
Other current and long-term liabilities
26,553

 
39,561

 Net cash from operating activities
221,469

 
178,827

Cash flows used in investing activities:
 
 
 
Additions to property, plant and equipment
(127,736
)
 
(175,348
)
Proceeds from sale and disposal of fixed assets
5,375

 
3,982

Acquisitions, net of cash acquired
(44,432
)
 
(207,089
)
Proceeds on sale of businesses, net of transactional costs
46,339

 
47,134

Additions to intangible assets, including costs to obtain or renew permits
(1,348
)
 
(1,920
)
Purchases of available-for-sale securities

 
(598
)
Proceeds from sale of investments
376

 

Net cash used in investing activities
(121,426
)
 
(333,839
)
Cash flows from financing activities:
 
 
 
Change in uncashed checks
(8,657
)
 
(7,084
)
Proceeds from exercise of stock options
46

 
230

Issuance of restricted shares, net of shares remitted
(2,321
)
 
(2,500
)
Repurchases of common stock
(24,465
)
 
(15,869
)
Deferred financing costs paid
(5,746
)
 
(2,614
)
Excess tax benefit of stock-based compensation

 
21

Premiums paid on early extinguishment of debt
(6,028
)
 

Principal payment on debt
(401,000
)
 

Issuance of senior secured notes, net of discount
399,000

 

Issuance of senior unsecured notes, including premium

 
250,625

Net cash (used in) from financing activities
(49,171
)
 
222,809

Effect of exchange rate change on cash
3,789

 
5,352

Increase in cash and cash equivalents
54,661

 
73,149

Cash and cash equivalents, beginning of period
306,997

 
184,708

Cash and cash equivalents, end of period
$
361,658

 
$
257,857

Supplemental information:
 
 
 
Cash payments for interest and income taxes:
 
 
 
Interest paid
$
67,550

 
$
66,261

Income taxes paid
14,321

 
27,196

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

 
479

Property, plant and equipment accrued
14,509

 
18,181

Transfer of inventory to property, plant and equipment
12,641

 

Receivable for estimated purchase price adjustment

 
1,910

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

4


CLEAN HARBORS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 
Common Stock
 
Shares Held
Under
Employee
Participation
Plan
 
 
 
Accumulated
Other
Comprehensive Loss
 
 
 
 
 
Number
of
Shares
 
$ 0.01
Par
Value
 
 
Additional
Paid-in
Capital
 
 
Accumulated
Earnings
 
Total
Stockholders’
Equity
Balance at January 1, 2017
57,298

 
$
573

 
$
(469
)
 
$
725,670

 
$
(214,326
)
 
$
572,793

 
$
1,084,241

Cumulative effect of change in accounting for stock based compensation

 

 

 
681

 

 
(450
)
 
231

Net income

 

 

 

 

 
16,545

 
16,545

Other comprehensive income

 

 

 

 
44,858

 

 
44,858

Stock-based compensation

 

 

 
9,212

 

 

 
9,212

Issuance of restricted shares, net of shares remitted
100

 
1

 

 
(2,322
)
 

 

 
(2,321
)
Shares held under employee participation plan
(25
)
 

 
469

 
(469
)
 

 

 

Repurchases of common stock
(448
)
 
(5
)
 

 
(24,460
)
 

 

 
(24,465
)
Exercise of stock options
2

 

 

 
46

 

 

 
46

Balance at September 30, 2017
56,927

 
$
569

 
$

 
$
708,358

 
$
(169,468
)
 
$
588,888

 
$
1,128,347



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,” 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, 2016, which includes the audited consolidated balance sheet as of December 31, 2016 from which the one presented herein was derived.
(2) SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies are described in Note 2, "Significant Accounting Policies," in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. There have been no material changes in these policies or their application.
Reclassifications
As disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, in the fourth quarter of 2016 the Company changed the manner in which it manages its business, makes operating decisions and assesses the Company's performance. The Company's operations are now managed in six operating segments: Technical Services, Industrial Services, Field Services, Safety-Kleen, Oil and Gas Field Services and Lodging Services. For purposes of segment disclosure the Industrial Services and Field Services operating segments have been aggregated into a single reportable segment based upon their similar economic and other characteristics, and the Oil and Gas Field Services and Lodging Services operating segments have been combined as they do not meet the quantitative thresholds for separate presentation. The amounts presented for the three and nine months ended September 30, 2016 have been recast to reflect the impact of such changes. These reclassifications and adjustments had no effect on consolidated statements of operations, consolidated statements of comprehensive income (loss), consolidated statements of cash flows or consolidated statements of stockholders' equity for any of the periods presented.
Recent Accounting Pronouncements
Standards implemented
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, Inventory (Topic 330). The amendment provides guidance regarding the measurement of inventory. Entities should measure inventory within the scope of this update at the lower of cost and net realizable value. The adoption of ASU 2015-11 was applied prospectively and as of January 1, 2017 did not have an impact on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendment simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Stock-based compensation excess tax benefits or deficiencies are now reflected in the Consolidated Statements of Operations as a component of the provision for income taxes, whereas they previously were recognized in equity. Additionally, the Consolidated Statements of Cash Flows now include excess tax benefits as an operating activity. Previously, income tax benefits at settlement of an award were reported as a reduction to operating cash flows and an increase to financing cash flows to the extent that those benefits exceeded the income tax benefits reported in earnings during the award's vesting period. The Company has elected to apply that change in cash flow classification on a prospective basis, leaving previously reported net cash from operating activities and net cash from financing activities in the accompanying consolidated statement of cash flows for the period ended September 30, 2016 unchanged. Finally, the Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures. As a result of the adoption of this update, the Company recorded a cumulative-effect adjustment that reduced beginning retained earnings by $0.5 million, net of tax.

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In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The amendment provides updated guidance on eight specific cash flow issues, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from settlement of insurance claims and corporate-owned life insurance, distributions received from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. The Company early adopted the amendments in the Update on a retrospective basis in the second quarter of fiscal year 2017. As a result of adoption, the Company has recorded cash paid in the second and third quarters of 2017 for debt prepayment and extinguishment costs as financing activities in the accompanying consolidated statements of cash flows.
Standard to be implemented
In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In August 2015, FASB issued ASU 2015-14 which deferred the effective date of ASU 2014-09 for all entities by one year. In March 2016, FASB issued ASU 2016-08, which reduces the potential for diversity in practice arising from inconsistent application of the principal versus agent guidance, as well as the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. In April 2016, FASB issued ASU 2016-10, which reduces the potential for diversity in initial application, as well as the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. In May 2016, FASB issued ASU 2016-12, which provided narrow scope improvements and practical expedients on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. ASU 2014-09 is currently effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company expects that it will adopt ASU 2014‑09 beginning in the first quarter of 2018 and continues its evaluation of the impact of the new standard on its accounting policies, disclosures, processes, and system requirements. The Company has assigned internal resources to assist in this implementation project and believes that the project is progressing timely. The Company currently anticipates adopting this ASU using the modified retrospective method. While the Company’s impact assessment is not yet complete, based on the results of its work to date, it currently does not expect the application of the new standard to have a material impact to its consolidated financial statement results. As the Company completes its evaluation of this new standard, the Company's preliminary assessments could change.
    
In October 2016, the FASB issued ASU 2016-16, Income Tax - Intra-Entity Transfers of Assets Other than Inventory. The amendment improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The amendment should be applied using a modified retrospective basis and are effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The amendment is meant to clarify the scope of ASC Subtopic 610-20, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets and to add guidance for partial sales of nonfinancial assets. The amendment should be applied using a full retrospective method or a modified retrospective method and are effective at the same time as ASU 2014-09. Further, the Company is required to adopt ASU 2017-05 at the same time that it adopts the guidance in ASU 2014-09. Adoption is not expected to have a material impact on the Company's consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting. The amendment is meant to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendment should be applied prospectively to an award modified on or after the adoption date and are effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. Adoption is not expected to have a material impact on the Company's consolidated financial statements.


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(3) BUSINESS COMBINATIONS
2017 Acquisitions
    
On September 22, 2017, the Company acquired a privately held company which manufactures and sells part washer machines and related equipment for approximately $2.1 million. The acquired company is included in the Safety-Kleen operating segment. In connection with this acquisition a preliminary goodwill amount of $0.7 million was recognized.
    
On July 14, 2017, the Company acquired Lonestar West Inc. ("Lonestar"), a public company headquartered in Alberta, Canada, for approximately CAD $41.8 million, ($33.1 million USD), net of cash acquired, which included an equity payout of CAD $0.72 per share to Lonestar shareholders and the assumption of approximately CAD $21.3 million ($16.8 million USD) in outstanding debt, which Clean Harbors subsequently repaid. The acquisition is expected to support the Company's growth in the daylight and hydro excavation services markets. In addition to increasing the size of the Company's hydro vac fleet, Lonestar's network of locations will provide the Company with direct access to key geographic markets in both the United States and Canada. The acquired company will be included in the Industrial and Field Services segment. In connection with this acquisition a preliminary goodwill amount of $3.0 million was recognized.

On January 31, 2017, the Company acquired a privately held company for a purchase price of approximately $11.9 million in cash, net of cash acquired, and subject to customary post-closing adjustments. The acquired business produces and distributes oil products and therefore complements the Company's closed loop model as it relates to the sale of its oil products. The acquired company is included in the Safety-Kleen operating segment. In connection with this acquisition a preliminary goodwill amount of $4.9 million was recognized.

    
2016 Acquisitions
    
During 2016, the Company acquired seven businesses that complement the strategy to create a closed loop model as it relates to the sale of the Company's oil products. These acquisitions provided the Company with three additional oil re-refineries while also expanding its used motor oil collection network and providing greater blending and packaging capabilities. These acquisitions also provided the Company with greater access to customers in the West Coast region of the United States and additional locations with Part B permits. Operations of these acquisitions are primarily being integrated into the Safety-Kleen operating segment with certain operations also being integrated into the Technical Services and Industrial Services operating segments. The combined purchase price for the seven acquisitions was $204.8 million in cash, net of cash acquired. Upon acquisition, the acquired entities were immediately integrated into the Company's operating segments. Therefore it is impracticable to measure earnings attributable to the acquired businesses.

The allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of the acquisition dates. The Company believes that such information provides a reasonable basis for estimating the fair values of
assets acquired and liabilities assumed. The Company finalized the purchase accounting for the seven acquisitions in the second quarter of 2017.


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The components and allocation of the purchase price consist of the following amounts (in thousands):
 
At Acquisition Dates As Reported
December 31, 2016
 
Measurement Period Adjustments
 
Final Allocations
Accounts receivable
$
15,767

 
$
475

 
$
16,242

Inventories and supplies
12,515

 
173

 
12,688

Prepaid expenses and other current assets
777

 
(25
)
 
752

Property, plant and equipment
143,025

 
891

 
143,916

Permits and other intangibles
28,856

 

 
28,856

Current liabilities
(20,258
)
 
353

 
(19,905
)
Closure and post-closure liabilities
(2,408
)
 
(596
)
 
(3,004
)
Remedial liabilities, less current portion
(2,041
)
 
(504
)
 
(2,545
)
Deferred taxes, unrecognized tax benefits and other long-term liabilities
(17,019
)
 
(3,200
)
 
(20,219
)
Total identifiable net assets
159,214

 
(2,433
)
 
156,781

Goodwill
45,791

 
2,186

 
47,977

Total purchase price, net of cash acquired
$
205,005

 
$
(247
)
 
$
204,758


Pro forma revenue and earnings amounts on a combined basis as if these acquisitions had been completed on January 1, 2016 are immaterial to the consolidated financial statements of the Company since that date.

(4) DISPOSITION OF BUSINESSES
2017 Disposition

On June 30, 2017, the Company completed the sale of its Transformer Services business, as part of its continuous focus on improving or divesting certain non-core operations. The Transformer Services business was a non-core business previously included within the Technical Services operating segment and was sold for approximately $46.5 million ($44.4 million net of $2.1 million in transactional related costs) subject to potential adjustments from customary post-closing conditions. As a result of the sale, the Company has recognized in the nine months ended September 30, 2017, a pre-tax gain $31.6 million which is included in (loss) gain on sale of business in the Company’s consolidated statement of operations.

The following table presents the carrying amounts of the Company's Transformer Services business that was disposed of on June 30, 2017 (in thousands):
 
June 30, 2017
Total current assets
$
7,241

Property, plant and equipment, net
8,773

Total other assets
1,681

Total assets divested
$
17,695

Total current liabilities
3,849

Total other liabilities
1,170

Total liabilities divested
$
5,019

Net carrying value divested
$
12,676


The Company evaluated the disposition and determined it did not meet the “major effect” criteria for classification as a discontinued operation largely due to the nature and size of the operations of the disposed entity. However, the Company determined that the disposition represented an individually significant component of the Company’s business. The following table presents income attributable to the Transformer Services business included in the Company's consolidated results of operations for each of the periods shown and through its disposition on June 30, 2017 (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Income before provision for income taxes
$

 
$
318

 
$
2,771

 
$
2,111


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2016 Disposition
    
On September 1, 2016, the Company completed the sale of its Catalyst Services business, which was a non-core business previously included within the Industrial and Field Services segment. During the first quarter of 2017, the Company and the buyer of the Catalyst Services business agreed to final working capital amounts and as a result the Company received $2.0 million of additional final sale proceeds.

The following table presents the income before provision for (loss) income taxes attributable to the Catalyst Services business included in the Company's consolidated results of operations for three and nine months ended September 30, 2016 (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2016
 
September 30, 2016
(Loss) income before provision for income taxes
$
(1,218
)
 
$
290


(5) INVENTORIES AND SUPPLIES
Inventories and supplies consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
Oil and oil products
$
57,602

 
$
52,158

Supplies and drums
93,654

 
90,610

Solvent and solutions
8,680

 
8,566

Modular camp accommodations
1,945

 
15,255

Other
11,216

 
11,839

Total inventories and supplies
$
173,097

 
$
178,428

As of September 30, 2017 and December 31, 2016, other inventories consisted primarily of cleaning fluids, such as absorbents and wipers, and automotive fluids, such as windshield washer fluid and antifreeze. Supplies and drums consist primarily of drums and containers as well as critical spare parts to support its incinerator and re-refinery operations. During the second quarter of 2017, $12.6 million of modular camp accommodations inventory was transferred to and included as camp equipment within the Company's property, plant and equipment amount as such assets will be utilized in the Company's ongoing camp and lodging operations.

(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
Land
$
121,806

 
$
120,575

Asset retirement costs (non-landfill)
14,905

 
14,567

Landfill assets
143,503

 
139,708

Buildings and improvements
411,006

 
373,160

Camp equipment
171,163

 
152,740

Vehicles
613,767

 
541,022

Equipment
1,628,256

 
1,483,736

Furniture and fixtures
5,586

 
5,492

Construction in progress
52,523

 
146,904

 
3,162,515

 
2,977,904

Less - accumulated depreciation and amortization
1,550,544

 
1,366,077

Total property, plant and equipment, net
$
1,611,971

 
$
1,611,827

Interest in the amount of $0.2 million and $0.4 million was capitalized to fixed assets during the three and nine months ended September 30, 2017, respectively. Interest in the amount of $1.5 million and $4.0 million was capitalized to fixed assets during the three and nine months ended September 30, 2016, respectively. Depreciation expense, inclusive of landfill amortization, was $64.0 million and $189.2 million for the three and nine months ended September 30, 2017, respectively. Depreciation expense,

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inclusive of landfill amortization, was $62.6 million and $185.4 million for the three and nine months ended September 30, 2016, respectively.

(7) GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in goodwill by segment for the nine months ended September 30, 2017 were as follows (in thousands):
 
Technical Services
 
Industrial & Field Services
 
Safety-Kleen
 
Oil, Gas and Lodging Services
 
Totals
Balance at January 1, 2017
$
61,116

 
$
107,968

 
$
296,070

 
$

 
$
465,154

Increase from current period acquisitions

 
2,999

 
5,613

 

 
8,612

Measurement period adjustments from prior period acquisitions

 

 
2,186

 

 
2,186

Decrease from disposition of business
(1,300
)
 

 

 

 
(1,300
)
Foreign currency translation and other
338

 
1,398

 
2,340

 

 
4,076

Balance at September 30, 2017
$
60,154

 
$
112,365

 
$
306,209

 
$

 
$
478,728

The Company assesses goodwill for impairment on an annual basis as of December 31, or at an interim date when events or changes in the business environment would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company conducted the annual impairment test of goodwill for all reporting units as of December 31, 2016 and determined that no adjustment to the carrying value of goodwill for any reporting units was necessary because the fair value of each of the reporting units exceeded that reporting unit's respective carrying value.
As a result of the sale of the Transformer Services business discussed in Note 4, "Disposition of Businesses", to the accompanying financial statements, the Company assessed qualitative factors to determine whether it was more likely than not that the fair value of the remaining Technical Services reporting unit was less than its carrying value. As a result of its qualitative assessment, the Company noted no indicators of impairment for the remaining Technical Services reporting unit existed as of the date of sale.
As of September 30, 2017 and December 31, 2016, the Company's total finite-lived and indefinite-lived intangible assets consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
 
Cost
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Remaining Amortization
Period
(in years)
 
Cost
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Remaining Amortization
Period
(in years)
Permits
$
174,571

 
$
72,788

 
$
101,783

 
21.2
 
$
171,637

 
$
67,301

 
$
104,336

 
18.9
Customer and supplier relationships
398,778

 
151,744

 
247,034

 
11.5
 
393,426

 
127,462

 
265,964

 
12.2
Other intangible assets
36,077

 
31,414

 
4,663

 
7.3
 
34,254

 
28,456

 
5,798

 
7.1
Total amortizable permits and other intangible assets
609,426

 
255,946

 
353,480

 
14.2
 
599,317

 
223,219

 
376,098

 
13.9
Trademarks and trade names
124,159

 

 
124,159

 
Indefinite
 
122,623

 

 
122,623

 
Indefinite
Total permits and other intangible assets
$
733,585

 
$
255,946

 
$
477,639

 

 
$
721,940

 
$
223,219

 
$
498,721

 

Amortization expense of permits and other intangible assets was $8.9 million and $27.7 million for the three and nine months ended September 30, 2017, respectively. Amortization expense of permits and other intangible assets was $10.8 million and $30.3 million for the three and nine months ended September 30, 2016, respectively.

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The expected amortization of the net carrying amount of finite-lived intangible assets at September 30, 2017 was as follows (in thousands):
Years Ending December 31,
Expected Amortization
2017 (three months)
$
9,039

2018
34,463

2019
31,521

2020
29,206

2021
26,747

Thereafter
222,504

 
$
353,480


(8) ACCRUED EXPENSES
Accrued expenses consisted of the following at September 30, 2017 and December 31, 2016 (in thousands):
 
September 30, 2017
 
December 31, 2016
Insurance
$
59,552

 
$
63,061

Interest
18,321

 
21,536

Accrued compensation and benefits
52,408

 
34,641

Income, real estate, sales and other taxes
49,892

 
35,083

Other
33,016

 
36,400

 
$
213,189

 
$
190,721

As of September 30, 2017 and December 31, 2016, other accrued expenses included accrued legal matters of $1.0 million and $3.8 million, respectively, and accrued severance charges of $1.3 million and $2.9 million, respectively.

(9) CLOSURE AND POST-CLOSURE LIABILITIES
The changes to closure and post-closure liabilities (also referred to as “asset retirement obligations”) from January 1, 2017 through September 30, 2017 were as follows (in thousands):
 
Landfill
Retirement
Liability
 
Non-Landfill
Retirement
Liability
 
Total
Balance at January 1, 2017
$
30,630

 
$
27,701

 
$
58,331

Liabilities assumed in acquisitions

 
27

 
27

Measurement period adjustments from prior period acquisitions

 
596

 
596

New asset retirement obligations
1,376

 

 
1,376

Adjustment related to disposition of business

 
(1,170
)
 
(1,170
)
Accretion
1,658

 
1,882

 
3,540

Changes in estimates recorded to statement of operations
(131
)
 
(126
)
 
(257
)
Changes in estimates recorded to balance sheet

 
(284
)
 
(284
)
Expenditures
(2,269
)
 
(352
)
 
(2,621
)
Currency translation and other
182

 
119

 
301

Balance at September 30, 2017
$
31,446

 
$
28,393

 
$
59,839

All of the landfill facilities included in the above were active as of September 30, 2017. There were no significant charges (benefits) in 2017 resulting from changes in estimates for closure and post-closure liabilities.
New asset retirement obligations incurred during the first nine months of 2017 were discounted at the credit-adjusted risk-free rate of 6.32%.


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(10) REMEDIAL LIABILITIES 
The changes to remedial liabilities for the nine months ended September 30, 2017 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, 2017
$
1,777

 
$
64,151

 
$
62,079

 
$
128,007

Measurement period adjustments from prior period acquisitions

 

 
504

 
504

Accretion
64

 
1,976

 
1,473

 
3,513

Changes in estimates recorded to statement of operations
(34
)
 
(277
)
 
256

 
(55
)
Expenditures
(30
)
 
(3,099
)
 
(4,328
)
 
(7,457
)
Currency translation and other
(1
)
 
2,742

 
(1,740
)
 
1,001

Balance at September 30, 2017
$
1,776

 
$
65,493

 
$
58,244

 
$
125,513

In the nine months ended September 30, 2017, there were no significant charges (benefits) resulting from changes in estimates for remedial liabilities.

(11) FINANCING ARRANGEMENTS 
The following table is a summary of the Company’s financing arrangements (in thousands):
 
September 30, 2017
 
December 31, 2016
Senior secured notes due June 30, 2024 ("Term Loan"), current
$
4,000

 
$

Current portion of long-term obligations, at carrying value
$
4,000

 
$

 
 
 
 
Senior secured notes due June 30, 2024
$
395,000

 
$

Senior unsecured notes, at 5.25%, due August 1, 2020 ("2020 Notes")
400,000

 
800,000

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

 
845,000

Long-term obligations
$
1,640,000

 
$
1,645,000

Unamortized debt issuance costs and debt discount/premium, net
(14,029
)
 
(11,728
)
Long-term obligations, at carrying value
$
1,625,971

 
$
1,633,272

 
 
 
 
Total current and long-term obligations, at carrying value
$
1,629,971

 
$
1,633,272

   
On June 30, 2017, the Company, and substantially all of the Company’s domestic subsidiaries as guarantors, entered into a $400.0 million senior secured Credit Agreement (the "Term Loan Agreement"). Loans under the Term Loan Agreement will mature on June 30, 2024 and may be prepaid at any time without premium or penalty other than customary breakage costs with respect to Eurodollar based loans or if the Company engages in certain repricing transactions before December 31, 2017, in which event a 1.0% prepayment premium would be due. The Company’s obligations under the Term Loan Agreement are guaranteed by all of the Company’s domestic restricted subsidiaries and secured by liens on substantially all of the assets of the Company and the guarantors.

Borrowings under the Term Loan Agreement will bear interest, at the Company’s election, at either of the following rates: (a) the sum of the Eurodollar Rate (as defined in the Term Loan Agreement) plus 2.00%, or (b) the sum of the Base Rate (as defined in the Term Loan Agreement) plus 1.00%, with the Eurodollar Rate being subject to a floor of 0.00%. The effective interest rate of the Term Loan on September 30, 2017 was 3.24%. The Term Loan Agreement contains representations and warranties, affirmative and negative covenants, and events of default, which the Company believes are usual and customary for an agreement of this type. Such covenants restrict the Company’s ability, among other matters, to incur debt, create liens on the Company’s assets, make restricted payments or investments or enter into transactions with affiliates. In accordance with the Term Loan Agreement required payments equal to .25% of the initial $400.0 million are due upon the last day of each calendar quarter.

Upon entering into the Term Loan Agreement on June 30, 2017, the Company used approximately $312.6 million of the proceeds to purchase approximately $296.2 million aggregate principal amount (the “Repurchased Notes”) of the Company’s previously outstanding 2020 Notes, pay accrued interest of approximately $6.4 million on the Repurchased Notes, premiums to repay

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the debt early of $4.7 million and expenses incurred of approximately $5.3 million in connection with the Term Loan financing and the tender offer for the 2020 Notes.

On June 30, 2017, the Company also delivered a notice of redemption to the holders of the approximately $503.8 million aggregate principal amount of 2020 Notes which remained outstanding after the purchase of the Repurchased Notes. Pursuant to that notice, the Company redeemed on August 1, 2017, approximately $103.8 million aggregate principal amount of 2020 Notes at a redemption price of 101.313%, plus accrued but unpaid interest. In conjunction with the redemption, the Company paid premiums to repay the debt early of $1.3 million and expenses incurred of approximately $0.8 million. The Company financed the redemption through the remaining net proceeds of the Term Loan financing described above, plus available cash.
    
At September 30, 2017, the fair value of the Term Loan debt was $399.8 million. At September 30, 2017 and December 31, 2016, the fair value of the Company's 2020 Notes was $405.6 million and $820.0 million, respectively, based on quoted market prices for the instrument. At September 30, 2017 and December 31, 2016, the fair value of the Company's 2021 Notes was $857.8 million and $861.9 million, respectively, based on quoted market prices for the instrument. The fair value of the Term Loan debt, 2020 Notes and 2021 Notes are considered a Level 2 measure according to the fair value hierarchy.

The Company also maintains a $400.0 million revolving credit facility under which as of September 30, 2017 and December 31, 2016, the Company had no outstanding loan balances. At September 30, 2017, approximately $238.3 million was available to borrow and outstanding letters of credit were $124.9 million. At December 31, 2016, $195.2 million was available to borrow and outstanding letters of credit were $132.6 million.    

(12) 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Numerator for basic and diluted earnings (loss) per share:
 

 
 

 
 
 
 
Net income (loss)
$
12,058

 
$
(10,255
)
 
$
16,545

 
$
(27,160
)
 
 
 
 
 
 
 
 
Denominator:
 

 
 

 
 
 
 
Basic shares outstanding
57,033

 
57,487

 
57,149

 
57,575

Dilutive effect of equity-based compensation awards
162

 

 
131

 

Dilutive shares outstanding
57,195

 
57,487

 
57,280

 
57,575

 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
$
0.21

 
$
(0.18
)
 
$
0.29

 
$
(0.47
)
 
 

 
 

 
 

 
 

Diluted earnings (loss) per share:
$
0.21

 
$
(0.18
)
 
$
0.29

 
$
(0.47
)
For the three and nine months ended September 30, 2017, the dilutive effect of all then outstanding restricted stock and performance awards is included in the EPS calculations above except for 301,300 of outstanding performance stock awards for which the performance criteria were not attained at that time and 3,724 and 19,485, respectively, of restricted stock awards which were antidilutive at that time.

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

(13) ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in accumulated other comprehensive loss by component and related tax effects for the nine months ended September 30, 2017 were as follows (in thousands):    

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Foreign Currency Translation
 
Unrealized (Losses) Gains on Available-For-Sale Securities
 
Unfunded Pension Liability
 
Total
Balance at January 1, 2017
$
(212,211
)
 
$
(321
)
 
$
(1,794
)
 
$
(214,326
)
Other comprehensive income before reclassifications
44,545

 
299

 

 
44,844

Amounts reclassified out of accumulated other comprehensive loss

 
222

 

 
222

Tax effects

 
(208
)
 

 
(208
)
Other comprehensive income
$
44,545

 
$
313

 
$

 
$
44,858

Balance at September 30, 2017
$
(167,666
)
 
$
(8
)
 
$
(1,794
)
 
$
(169,468
)
The amounts reclassified out of accumulated other comprehensive loss into the consolidated statements of operations, with presentation location during the three and nine months ended September 30, 2017 were as follows (in thousands):
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
Comprehensive (Loss) Income Components
 
September 30, 2017
 
September 30, 2017
 
Location
Unrealized holding gains on available-for-sale investments
 
$

 
$
222

 
Other expense
There were no reclassifications out of accumulated other comprehensive loss into the consolidated statements of operations during the three and nine months ended September 30, 2016.

(14) STOCK-BASED COMPENSATION
Total stock-based compensation cost charged to selling, general and administrative expenses for the three and nine months ended September 30, 2017 was $4.0 million and $9.2 million, respectively. Total stock-based compensation cost charged to selling, general and administrative expenses for the three and nine months ended September 30, 2016 was $3.0 million and $7.7 million, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $1.2 million and $2.7 million for the three and nine months ended September 30, 2017, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation was $0.9 million and $2.3 million for the three and nine months ended September 30, 2016, respectively.
Restricted Stock Awards
The following information relates to restricted stock awards that have been granted to employees and directors under the Company's equity incentive plans (the "Plans"). The restricted stock awards are not transferable until vested and the restrictions generally lapse upon the achievement of continued employment over a three-to-five-year period or service as a director until the following annual meeting of shareholders. The fair value of each restricted stock grant is based on the closing price of the Company's common stock on the date of grant and is amortized to expense over its vesting period.
    
The following table summarizes information about restricted stock awards for the nine months ended September 30, 2017:
Restricted Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2017
510,041

 
$
52.65

Granted
295,568

 
$
56.00

Vested
(115,365
)
 
$
53.89

Forfeited
(47,784
)
 
$
51.35

Balance at September 30, 2017
642,460

 
$
54.07

    
As of September 30, 2017, there was $27.8 million of total unrecognized compensation cost arising from restricted stock awards under the Company's Plans. This cost is expected to be recognized over a weighted average period of 2.9 years. The total fair value of restricted stock vested during the three and nine months ended September 30, 2017 was $0.5 million and $6.2 million, respectively. The total fair value of restricted stock vested during the three and nine months ended September 30, 2016 was $1.8 million and $7.9 million, respectively.
    

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Performance Stock Awards

The following information relates to performance stock awards that have been granted to employees under the Company's Plans. Performance stock awards are subject to performance criteria established by the compensation committee of the Company's board of directors prior to or at the date of grant. The vesting of the performance stock awards is based on achieving such targets typically based on revenue, Adjusted EBITDA margin, 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 nine months ended September 30, 2017:
Performance Stock
Number of Shares
 
Weighted Average
Grant-Date
Fair Value
Balance at January 1, 2017
220,882

 
$
54.69

Granted
167,964

 
$
55.84

Vested
(25,168
)
 
$
54.84

Forfeited
(25,544
)
 
$
56.19

Balance at September 30, 2017
338,134

 
$
55.25


As of September 30, 2017, there was $1.5 million of total unrecognized compensation cost arising from unvested performance stock awards deemed probable of vesting under the Company's Plans. No performance awards vested during the three months ended September 30, 2017. The total fair value of performance awards vested during the nine months ended September 30, 2017 was $1.4 million. No performance awards vested during the three months ended September 30, 2016. The total fair value of performance awards vested during the nine months ended September 30, 2016 was $0.4 million.

Common Stock Repurchases
On October 31, 2017, the Company's board of directors authorized the repurchase of up to an additional $300 million of the Company's common stock, resulting in a total of $375.7 million currently being available for stock repurchase. During the three and nine months ended September 30, 2017, the Company repurchased and retired a total of 0.2 million shares and 0.5 million respectively, of the Company's common stock for a total cost of $12.2 million and $24.5 million, respectively. During the three and nine months ended September 30, 2016, the Company repurchased and retired a total of 0.1 million shares and 0.3 million shares, respectively, of the Company's common stock for a total cost of $6.2 million and $16.3 million, respectively. Through September 30, 2017, the Company had repurchased and retired a total of 4.3 million shares of the Company's common stock for a total cost of $224.3 million under this program. As of September 30, 2017, an additional $75.7 million remained available for repurchase of shares under the previously authorized program.

(15) COMMITMENTS AND CONTINGENCIES
Legal and Administrative Proceedings
The Company and its subsidiaries are subject to legal proceedings and claims arising in the ordinary course of business. Actions filed against the Company arise from commercial and employment-related claims including alleged class actions related to sales practices and wage and hour claims. The plaintiffs in these actions may be seeking damages or injunctive relief or both. These actions are in various jurisdictions and stages of proceedings, and some are covered in part by insurance. In addition, the Company’s waste management services operations are regulated by federal, state, provincial and local laws enacted to regulate discharge of materials into the environment, remediation of contaminated soil and groundwater or otherwise protect the environment. This ongoing regulation results in the Company frequently becoming a party to legal or administrative proceedings involving all levels of governmental authorities and other interested parties. The issues involved in such proceedings generally relate to alleged violations of existing permits and licenses or alleged responsibility under federal or state Superfund laws to remediate contamination at properties owned either by the Company or by other parties (“third party sites”) to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes.
At September 30, 2017 and December 31, 2016, the Company had recorded reserves of $19.1 million and $22.0 million, respectively, in the Company's financial statements for actual or probable liabilities related to the legal and administrative proceedings in which the Company was then involved, the principal of which are described below. At September 30, 2017 and

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December 31, 2016, the Company also believed that it was reasonably possible that the amount of these potential liabilities could be as much as $1.8 million and $1.9 million more, respectively. The Company periodically adjusts the aggregate amount of these reserves when actual or probable liabilities are paid or otherwise discharged, new claims arise, or additional relevant information about existing or probable claims becomes available. As of September 30, 2017 and December 31, 2016, the $19.1 million and $22.0 million, respectively, of reserves consisted of (i) $18.1 million and $18.2 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) $1.0 million and $3.8 million, respectively, primarily related to federal, state and provincial enforcement actions, which were included in accrued expenses on the consolidated balance sheets.
As of September 30, 2017, the principal legal and administrative proceedings in which the Company was involved, or which had been terminated during 2017, were as follows:
Ville Mercier.    In September 2002, the Company acquired the stock of a subsidiary (the "Mercier Subsidiary") which owns a hazardous waste incinerator in Ville Mercier, Quebec (the "Mercier Facility"). The property adjacent to the Mercier Facility, which is also owned by the Mercier Subsidiary, is now contaminated as a result of actions dating back to 1968, when the Government of Quebec issued to a company unrelated to the Mercier Subsidiary two permits to dump organic liquids into lagoons on the property. In 1999, Ville Mercier and three neighboring municipalities filed separate legal proceedings against the Mercier Subsidiary and the Government of Quebec. In 2012, the municipalities amended their existing statement of claim to seek $2.9 million (Cdn) in general damages and $10.0 million (Cdn) in punitive damages, plus interest and costs, as well as injunctive relief. Both the Government of Quebec and the Company have filed summary judgment motions against the municipalities. The parties are currently attempting to negotiate a resolution and hearings on the motions have been delayed. In September 2007, the Quebec Minister of Sustainable Development, Environment and Parks issued a Notice pursuant to Section 115.1 of the Environment Quality Act, superseding Notices issued in 1992, which are the subject of the pending litigation. The more recent Notice notifies the Mercier Subsidiary that, if the Mercier Subsidiary does not take certain remedial measures at the site, the Minister intends to undertake those measures at the site and claim direct and indirect costs related to such measures. The Company has accrued for costs expected to be incurred relative to the resolution of this matter and believes this matter will not have future material effect on its financial position or results of operations.
Safety-Kleen Legal Proceedings. On December 28, 2012, the Company acquired Safety-Kleen, Inc. ("Safety-Kleen") and thereby became subject to the legal proceedings in which Safety-Kleen was a party on that date. In addition to certain Superfund proceedings in which Safety-Kleen has been named as a potentially responsible party as described below under “Superfund Proceedings,” the principal such legal proceedings involving Safety-Kleen which were outstanding as of September 30, 2017 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 59 proceedings (excluding cases which have been settled but not formally dismissed) as of September 30, 2017, wherein persons claim personal injury resulting from the use of Safety-Kleen's parts cleaning equipment or cleaning products. These proceedings typically involve allegations that the solvent used in Safety-Kleen's parts cleaning equipment contains contaminants and/or that Safety-Kleen's recycling process does not effectively remove the contaminants that become entrained in the solvent during their use. In addition, certain claimants assert that Safety-Kleen failed to warn adequately the product user of potential risks, including an historic failure to warn that solvent contains trace amounts of toxic or hazardous substances such as benzene.
Safety-Kleen maintains insurance that it believes will provide coverage for these product liability claims (over amounts accrued for self-insured retentions and deductibles in certain limited cases), except for punitive damages to the extent not insurable under state law or excluded from insurance coverage. Safety-Kleen also believes that these claims lack merit and has historically vigorously defended, and intends to continue to vigorously defend, itself and the safety of its products against all of these claims. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, Safety-Kleen is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of September 30, 2017. From January 1, 2017 to September 30, 2017, 25 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.    

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Superfund Proceedings
The Company has been notified that either the Company (which, since December 28, 2012, includes Safety-Kleen) or the prior owners of certain of the Company's facilities for which the Company may have certain indemnification obligations have been identified as potentially responsible parties ("PRPs") or potential PRPs in connection with 129 sites which are subject to or are proposed to become subject to proceedings under federal or state Superfund laws. Of the 129 sites, three (including the BR Facility described below) involve facilities that are now owned or leased by the Company and 126 involve third party sites to which either the Company or the prior owners of certain of the Company’s facilities shipped wastes. Of the 126 third party sites, 33 are now settled, 16 are currently requiring expenditures on remediation and 77 are not currently requiring expenditures on remediation.
In connection with each site, the Company has estimated the extent, if any, to which it may be subject, either directly or as a result of any indemnification obligations, for cleanup and remediation costs, related legal and consulting costs associated with PRP investigations, settlements, and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability (if any) of the Company 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 11 of the 126 third party sites.
BR Facility.    The Company acquired in 2002 a former hazardous waste incinerator and landfill in Baton Rouge (the "BR Facility"), for which operations had been previously discontinued by the prior owner. In September 2007, the Environmental Protection Agency (the "EPA") issued a special notice letter to the Company related to the Devil's Swamp Lake Site ("Devil's Swamp") in East Baton Rouge Parish, Louisiana. Devil's Swamp includes a lake located downstream of an outfall ditch where wastewater and storm water have been discharged, and Devil's Swamp is proposed to be included on the National Priorities List due to the presence of Contaminants of Concern ("COC") cited by the EPA. These COCs include substances of the kind found in wastewater and storm water discharged from the BR Facility in past operations. The EPA originally requested COC generators to submit a good faith offer to conduct a remedial investigation feasibility study directed towards the eventual remediation of the site. The Company is currently performing corrective actions at the BR Facility under an order issued by the Louisiana Department of Environmental Quality, and has begun conducting the remedial investigation and feasibility study under an order issued by the EPA. The Company cannot presently estimate the potential additional liability for the Devil's Swamp cleanup until a final remedy is selected by the EPA.
Third Party Sites.    Of the 126 third party sites at which the Company has been notified it is a PRP or potential PRP or may have indemnification obligations, Clean Harbors has an indemnification agreement at 11 of these sites with ChemWaste, a former subsidiary of Waste Management, Inc., and at six additional of these third party sites, Safety-Kleen has a similar indemnification agreement with McKesson Corporation. These agreements indemnify the Company (which now includes Safety-Kleen) with respect to any liability at the 17 sites for waste disposed prior to the Company's (or Safety-Kleen's) acquisition of the former subsidiaries of Waste Management and McKesson which had shipped wastes to those sites. Accordingly, Waste Management or McKesson are paying all costs of defending those subsidiaries in those 17 cases, including legal fees and settlement costs. However, there can be no guarantee that the Company's ultimate liabilities for those sites will not exceed the amount recorded or that indemnities applicable to any of these sites will be available to pay all or a portion of related costs. Except for the indemnification agreements which the Company holds from ChemWaste, McKesson and one other entity, the Company does not have an indemnity agreement with respect to any of the 126 third party sites discussed above.
Federal, State and Provincial Enforcement Actions
From time to time, the Company pays fines or penalties in regulatory proceedings relating primarily to waste treatment, storage or disposal facilities. As of September 30, 2017 and December 31, 2016, there were five proceedings for which the Company reasonably believes that the sanctions could equal or exceed $100,000. The Company believes that the fines or other penalties in these or any of the other regulatory proceedings will, individually or in the aggregate, not have a material effect on its financial condition, results of operations or cash flows.

(16) INCOME TAXES 
The Company records a tax provision or benefit on an interim basis using an estimated annual effective tax rate. This rate is applied to the current period ordinary income or loss to determine the income tax provision or benefit allocated to the interim period. Losses from jurisdictions for which no benefit can be recognized and the income tax effects of unusual or infrequent items are excluded from the estimated annual effective tax rate and are recognized in the impacted interim period. The estimated annual

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effective tax rate may be significantly impacted by projected earnings mix by tax jurisdiction. Adjustments to the estimated annual effective income tax rate are recognized in the period when such estimates are revised.
The Company’s effective tax rate for the three and nine months ended September 30, 2017 was 51.0% and 69.9% compared to 47.8% and 80.3% for the same periods in 2016. The variations in the effective income tax rates for the three and nine months ended September 30, 2017 as compared to more customary relationships between pre-tax income and the provision for income taxes were primarily due to the Company not recognizing income tax benefits from current operating losses related to certain Canadian entities and in the second quarter of 2017 the tax expense associated with the gain on the sale of the Transformer Services business.
As of September 30, 2017 and December 31, 2016, the Company had recorded $1.8 million and $1.7 million, respectively, of liabilities for unrecognized tax benefits and $0.4 million and $0.3 million of interest, respectively.
Due to expiring statute of limitation periods, the Company believes that total unrecognized tax benefits will decrease by $0.4 million within the next 12 months.

(17) SEGMENT REPORTING 
Segment reporting is prepared on the same basis that the Company's chief executive officer, who is the Company's chief operating decision maker, manages its business, makes operating decisions and assesses performance. The Company's operations are managed in six operating segments: Technical Services, Industrial Services, Field Services, Safety-Kleen, Oil and Gas Field Services and Lodging Services. For purposes of segment disclosure the Industrial Services and Field Services operating segments have been aggregated into a single reportable segment based upon their similar economic and other characteristics, and the Oil and Gas Field Services and Lodging Services operating segments have been combined as they do not meet the quantitative thresholds for separate presentation.

Third-party revenue is revenue billed to outside customers by a particular segment. Direct revenue is revenue allocated to the segment providing the product or service. Intersegment revenues represent the sharing of third-party revenues among the segments based on products and services provided by each segment as if the products and services were sold directly to the third-party. The intersegment revenues are shown net. The negative intersegment revenues are due to more transfers out of customer revenues to other segments than transfers in of customer revenues from other segments. The operations not managed through the Company’s operating segments described above are recorded as “Corporate Items.” Corporate Items revenues consist of two different operations for which the revenues are insignificant. Corporate Items cost of revenues represents certain central services that are not allocated to the Company's operating segments for internal reporting purposes. Corporate Items selling, general and administrative expenses include typical corporate items such as legal, accounting and other items of a general corporate nature that are not allocated to the Company’s operating segments.  
The following table reconciles third party revenues to direct revenues for the three and nine months ended September 30, 2017 and 2016 (in thousands):
 
For the Three Months Ended September 30, 2017
 
For the Three Months Ended September 30, 2016
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
Technical Services
$
246,329

 
$
41,366

 
$
637

 
$
288,332

 
$
232,482

 
$
38,795

 
$
492

 
$
271,769

Industrial and Field Services
163,808

 
(10,262
)
 
45

 
153,591

 
172,191

 
(10,867
)
 
(32
)
 
161,292

Safety-Kleen
315,028

 
(31,757
)
 
3

 
283,274

 
297,082

 
(28,716
)
 
1

 
268,367

Oil, Gas and Lodging Services
30,026

 
653

 
79

 
30,758

 
27,644

 
788

 
105

 
28,537

Corporate Items
655

 

 
(764
)
 
(109
)
 
121

 

 
(566
)
 
(445
)
Total
$
755,846

 
$

 
$

 
$
755,846

 
$
729,520

 
$

 
$

 
$
729,520


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For the Nine Months Ended September 30, 2017
 
For the Nine Months Ended September 30, 2016
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
 
Third party revenues
 
Intersegment revenues, net
 
Corporate Items, net
 
Direct revenues
Technical Services
$
731,034

 
$
121,411

 
$
1,767

 
$
854,212

 
$
680,717

 
$
109,217

 
$
1,547

 
$
791,481

Industrial and Field Services
465,264

 
(27,688
)
 
16

 
437,592

 
467,019

 
(25,464
)
 
(348
)
 
441,207

Safety-Kleen
910,885

 
(95,465
)
 
4

 
815,424

 
821,758

 
(86,329
)
 
368

 
735,797

Oil, Gas and Lodging Services
89,403

 
1,742

 
218

 
91,363

 
91,555

 
2,576

 
288

 
94,419

Corporate Items
989

 

 
(2,005
)
 
(1,016
)
 
2,064

 

 
(1,855
)
 
209

Total
$
2,197,575

 
$

 
$

 
$
2,197,575

 
$
2,063,113

 
$

 
$

 
$
2,063,113

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, other expense, interest expense, net, loss on early extinguishment of debt, goodwill impairment charge, provision for income taxes and excludes (loss) gain on sale of business. Transactions between the segments are accounted for at the Company’s best estimate based on similar transactions with outside customers.
The following table presents Adjusted EBITDA information used by management by reported segment (in thousands):
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Adjusted EBITDA:
 

 
 

 
 
 
 
Technical Services
$
72,338

 
$
72,333

 
$
203,906

 
$
201,622

Industrial and Field Services
13,255

 
18,234

 
36,652

 
38,627

Safety-Kleen
70,305

 
70,053

 
182,953

 
165,342

Oil, Gas and Lodging Services
912

 
24

 
969

 
135

Corporate Items
(33,811
)
 
(33,993
)
 
(100,655
)
 
(101,310
)
Total
$
122,999

 
$
126,651

 
$
323,825

 
$
304,416

Reconciliation to Consolidated Statements of Operations:
 

 
 

 
 
 
 
Accretion of environmental liabilities
2,347

 
2,476

 
7,053

 
7,529

Depreciation and amortization
72,989

 
73,360

 
216,932

 
215,655

Goodwill impairment charge

 
34,013

 

 
34,013

Income from operations
47,663

 
16,802

 
99,840

 
47,219

Other expense
432

 
198

 
2,814

 
737

Loss on early extinguishment of debt
1,846

 

 
7,891

 

Loss (gain) on sale of business
77

 
(16,431
)
 
(31,645
)
 
(16,431
)
Interest expense, net of interest income
20,675

 
21,565

 
65,743

 
62,192

Income before provision for income taxes
$
24,633

 
$
11,470

 
$
55,037

 
$
721


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Table of Contents

The following table presents certain assets by reportable segment and in the aggregate (in thousands):
 
September 30, 2017
 
Technical
Services
 
Industrial and Field
Services
 
Safety-Kleen
 
Oil, Gas and Lodging
Services
 
Corporate
Items
 
Totals
Property, plant and equipment, net
$
507,069

 
$
264,662

 
$
585,493

 
$
177,106

 
$
77,641

 
$
1,611,971

Goodwill
60,154

 
112,365

 
306,209

 

 

 
478,728

Permits and other intangibles, net
75,260

 
17,139

 
377,458

 
7,782

 

 
477,639

Total assets
$
848,578

 
$
485,297

 
$
1,475,764

 
$
239,308

 
$
699,406

 
$
3,748,353

 
December 31, 2016
 
Technical
Services
 
Industrial and Field
Services
 
Safety-Kleen
 
Oil, Gas and Lodging
Services
 
Corporate
Items
 
Totals
Property, plant and equipment, net
$
521,134

 
$
245,143

 
$
584,647

 
$
182,038

 
$
78,865

 
$
1,611,827

Goodwill
61,116

 
107,968

 
296,070

 

 

 
465,154

Permits and other intangibles, net
78,625

 
17,817

 
391,390

 
10,889

 

 
498,721

Total assets
$
862,957

 
$
446,826

 
$
1,474,755

 
$
253,242

 
$
644,140

 
$
3,681,920

The following table presents total assets by geographical area (in thousands):
 
September 30, 2017
 
December 31, 2016
United States
$
3,005,644

 
$
2,960,337

Canada
742,709

 
721,583

Total
$
3,748,353

 
$
3,681,920


(18) GUARANTOR AND NON-GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION
The 2020 Notes and the 2021 Notes (collectively, the "Notes") are guaranteed by substantially all of the Company’s subsidiaries organized in the United States. Each guarantor for the Notes 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, in particular, 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 Notes. The Notes 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”).
    

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Following is the condensed consolidating balance sheet at September 30, 2017 (in thousands):
 
Clean
Harbors, Inc.
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Consolidating
Adjustments
 
Total
Assets:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
51,514

 
$
221,552

 
$
88,592

 
$

 
$
361,658

Intercompany receivables
230,084

 
451,146

 
38,451

 
(719,681
)
 

Accounts receivables, net

 
435,058

 
96,638

 

 
531,696

Other current assets
897

 
215,847

 
51,871

 
(1,711
)
 
266,904

Property, plant and equipment, net

 
1,182,922

 
429,049

 

 
1,611,971

Investments in subsidiaries
2,933,843

 
585,660

 

 
(3,519,503
)
 

Intercompany debt receivable

 
92,938

 
21,000

 
(113,938
)
 

Goodwill

 
415,056

 
63,672

 

 
478,728

Permits and other intangibles, net

 
415,708

 
61,931

 

 
477,639

Other long-term assets
2,448

 
13,312

 
5,065

 
(1,068
)
 
19,757

Total assets
$
3,218,786

 
$
4,029,199

 
$
856,269

 
$
(4,355,901
)
 
$
3,748,353

Liabilities and Stockholders’ Equity:
 

 
 

 
 

 
 

 
 

Current liabilities
$
22,595

 
$
385,734

 
$
122,922

 
$
(1,711
)
 
$
529,540

Intercompany payables
441,873

 
266,776

 
11,032

 
(719,681
)
 

Closure, post-closure and remedial liabilities, net

 
148,791

 
17,045

 

 
165,836

Long-term obligations
1,625,971

 

 

 

 
1,625,971

Intercompany debt payable

 
21,000

 
92,938

 
(113,938
)
 

Other long-term liabilities

 
278,700

 
21,027

 
(1,068
)
 
298,659

Total liabilities
2,090,439

 
1,101,001

 
264,964

 
(836,398
)
 
2,620,006

Stockholders’ equity
1,128,347

 
2,928,198