<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
for the Quarterly Period Ended
September 30, 1996
----------
Commission File Number 0-16379
CLEAN HARBORS, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2997780
(State of Incorporation) (IRS Employer Identification No.)
1501 Washington Street, Braintree, MA 02184
(Address of Principal Executive Offices) (Zip Code)
(617) 849-1800 ext. 4454
(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
----- -----
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 9,743,152
---------------------------- --------------------------------
(Class) (Outstanding at November 6, 1996)
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<PAGE> 2
CLEAN HARBORS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS Pages
-----
Consolidated Statements of Income 1
Consolidated Balance Sheets 2-3
Consolidated Statements of Cash Flows 4-5
Consolidated Statement of Stockholders' Equity 6
Notes to Consolidated Financial Statements 7-8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-13
PART II: OTHER INFORMATION
Items No. 1 through 6 14
Signatures 15
<PAGE> 3
CLEAN HARBORS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(in thousands except for earnings per share amounts)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
1996 1995 1996 1995
------------------- ------------------
<S> <C> <C> <C> <C>
Revenues $50,738 $54,398 $146,112 $156,447
Cost of revenues 39,515 41,253 113,333 115,472
Selling, general and
administrative expenses 8,768 10,267 27,248 29,748
Depreciation and amortization 2,416 2,567 7,432 7,552
------- ------- -------- --------
Income (loss) from operations 39 311 (1,901) 3,675
Interest expense, net 2,362 2,328 6,870 6,462
------- ------- -------- --------
Loss before benefit from
income taxes (2,323) (2,017) (8,771) (2,787)
Benefit from income taxes (581) (817) (2,782) (1,200)
------- ------- -------- --------
Net loss $(1,742) $(1,200) $ (5,989) $ (1,587)
======= ======= ======== ========
Net loss per common and
common equivalent share $ (.19) $ (.14) $ (.66) $ (.20)
======= ======= ======== ========
Weighted average common and
common equivalent shares
outstanding 9,685 9,435 9,623 9,433
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1)
<PAGE> 4
CLEAN HARBORS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(Unaudited)
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 550 $ 225
Restricted investments 1,921 2,460
Accounts receivable, net of
allowance for doubtful accounts 43,400 48,417
Prepaid expenses 2,381 2,039
Supplies inventories 2,894 2,970
Income tax receivable 2,500 722
Deferred tax asset 4,436 2,415
-------- --------
Total current assets 58,082 59,248
Property, plant and equipment:
Land 8,231 8,364
Buildings and improvements 39,527 39,770
Vehicles and equipment 78,055 77,384
Furniture and fixtures 2,191 2,155
Construction in progress 1,744 1,317
-------- --------
129,748 128,990
Less - Accumulated depreciation
and amortization 59,603 54,256
-------- --------
Net property, plant and equipment 70,145 74,734
-------- --------
Other assets:
Restricted investments 6,154 5,207
Goodwill, net 21,660 22,202
Permits, net 12,829 13,489
Other 4,367 3,436
-------- --------
Total other assets 45,010 44,334
-------- --------
Total assets $173,237 $178,316
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
(2)
<PAGE> 5
CLEAN HARBORS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
(Unaudited)
------------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations $ 4,490 $ 3,605
Accounts payable 19,693 18,614
Accrued disposal costs 7,534 7,446
Other accrued expenses 13,425 17,886
Income tax payable 47 ---
-------- --------
Total current liabilities 45,189 47,551
-------- --------
Long-term obligations, less
current maturities 73,575 70,391
Stockholders' equity:
Preferred Stock, $.01 par value:
Series A Convertible;
Authorized-2,000,000 shares; Issued and
outstanding - none -- --
Series B Convertible;
Authorized-156,416 shares; Issued and
outstanding 112,000 shares at September
30, 1996 and December 31, 1995
(liquidation preference of $5.6 million) 1 1
Common Stock, $.01 par value
Authorized - 20,000,000 shares;
Issued and outstanding - 9,690,612 shares
at September 30, 1996 and 9,524,676 shares
at December 31, 1995 97 96
Additional paid-in capital 59,318 58,871
Unrealized loss on restricted investments,
net of tax (32) (7)
Retained earnings (accumulated deficit) (4,911) 1,413
-------- --------
Total stockholders' equity 54,473 60,374
-------- --------
Total liabilities and stockholders' equity $173,237 $178,316
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(3)
<PAGE> 6
CLEAN HARBORS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
<CAPTION>
NINE MONTHS ENDING
SEPTEMBER 30,
------------------
1996 1995
------- ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,989) $(1,587)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 7,432 7,552
Deferred taxes (2,004) (633)
Allowance for doubtful accounts 480 215
Amortization of deferred financing costs 477 365
Gain on sale of fixed assets (33) (17)
Changes in assets and liabilities:
Accounts receivable 4,537 (5,034)
Refundable income taxes (1,778) (1,360)
Prepaid expenses (342) (640)
Supplies inventories 76 (344)
Accounts payable 1,079 1,498
Accrued disposal costs 88 1,136
Other accrued expenses (4,461) 2,987
Taxes payable 47 --
------- -------
Net cash (used in) provided
by operating activities (391) 4,138
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,467) (11,352)
Additions to permits (13) (75)
Proceeds from sale and maturities of restricted
investments 730 42
Cost of restricted investments acquired (1,181) (5,998)
Increase in other assets (977) (1,737)
Proceeds from sale of fixed assets 919 26
------- -------
Net cash used in investing activities (2,989) (19,094)
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(4)
<PAGE> 7
CLEAN HARBORS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Unaudited
(in thousands)
<CAPTION>
NINE MONTHS ENDING
SEPTEMBER 30,
------------------
1996 1995
---- -----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividend distribution -- (335)
Issuance of long-term debt
(excluding the long-term revolver) 16,667 10,000
Net borrowings under long-term revolver (7,130) 6,341
Payments on long-term obligations (5,458) (1,158)
Additions to deferred financing costs (487) (802)
Proceeds from stock issuance/stock options 113 15
------- -------
Net cash provided by financing activities 3,705 14,061
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 325 (895)
Cash and equivalents, beginning of year 225 1,000
------- -------
Cash and equivalents, end of period $ 550 $ 105
======= =======
Supplemental Information:
Non cash investing and financing activities:
Stock dividend on preferred stock $ 335 --
Capital lease obligations -- $ 196
</TABLE>
For the nine months ended September 30, 1995 there were $1,799,000 of
accrued liabilities assumed as a result of the acquisition of the
incinerator in Kimball, Nebraska on May 12, 1995.
The accompanying notes are an integral part of these consolidated
financial statements.
(5)
<PAGE> 8
CLEAN HARBORS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Unaudited
(in thousands)
<CAPTION>
Series B
Preferred Stock Common Stock
--------------- ---------------
Retained
Number $0.01 Number $0.01 Additional Unrealized Loss Earnings Total
of Par of Par Paid-In on Restricted (accumulated Stockholders'
Shares Value Shares Value Capital Investments deficit) Equity
------ ----- ------ ----- ---------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 112 $1 9,525 $96 $58,871 $ (7) $ 1,413 $ 60,374
Preferred stock dividends:
Series B -- -- 118 1 334 -- (335) --
Employee stock purchase
plan -- -- 48 -- 113 -- -- 113
Change in unrealized loss on
restricted investments,
net of tax -- -- -- -- -- (25) -- (25)
Net Loss -- -- -- -- -- -- (5,989) (5,989)
--- -- ----- --- ------- ---- ------- --------
Balance at
September 30, 1996 112 $1 9,691 $97 $59,318 $(32) $(4,911) $ 54,473
=== == ===== === ======= ==== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(6)
<PAGE> 9
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 BASIS OF PRESENTATION
The consolidated interim financial statements included herein have been
prepared by the Company, pursuant to the rules and regulations of the
Securities and Exchange Commission, and include, in the opinion of
management, all adjustments (consisting of only normal recurring accruals)
necessary for the fair presentation of interim period results. The operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of those to be expected for the full fiscal year. Reference is
made to the audited consolidated financial statements and notes thereto
included in the Company's Report on Form 10-K for the year ended December
31, 1995 as filed with the Securities and Exchange Commission. The year end
condensed balance sheet data was derived from audited financial statements,
but does not include all disclosures required by generally accepted
accounting principles.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per common and common equivalent share is based on
net income(loss) less preferred stock dividend requirements divided by the
weighted average number of common and common equivalent shares outstanding
during each of the respective periods. Fully diluted net income (loss) per
common share has not been presented as the amount would not differ
significantly from that presented. Common share equivalents included in the
computation represent shares issuable upon assumed exercise of stock options
which would have a dilutive effect in periods where there are earnings.
NOTE 3 FINANCING ARRANGEMENTS
On September 6, 1996, the Company refinanced its $45,000,000 revolving
credit and term loan agreement (the "Loan Agreement") with a financial
institution by (i) guaranteeing $10,000,000 of 10.75% Economic Development
Revenue Bonds due September 1, 2026 issued by the City of Kimball, Nebraska
(the "Bonds"), and (ii) amending the Loan Agreement to reduce the maximum
credit thereunder from $45,000,000 to $35,000,000. The Company used the net
proceeds from the sale of the Bonds to repay a portion of its outstanding
debt under the Loan Agreement. That portion was originally incurred for
acquisition costs, including the costs relating to insurance premiums,
associated with the acquisition of the Kimball incinerator ("the Facility").
In connection with the issuance of the Bonds, the Company has entered into a
facilities lease with the City of Kimball whereby the City acquired a
leasehold interest in the Facility and the Company leased the Facility back
from the City. The Company retains title to the Facility.
(7)
<PAGE> 10
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 FINANCING ARRANGEMENTS (continued)
The Bonds were issued at 100% of their principal value. The Bonds are
not redeemable prior to September 1, 2006. From that date until September 1,
2008, the Bonds are redeemable at a premium. After September 1, 2008, the
Bonds are redeemable at par. Sinking fund payments begin on September 1,
1999 in the amount of $100,000 annually until the year 2008 when the sinking
fund payments will gradually increase annually. The Bonds provide for
certain covenants relating to, among others, incurrence of additional debt,
debt service coverage, earnings before income taxes, depreciation and
amortization ("EBITDA") coverage and the ratio of EBITDA to total debt.
Certain of these covenants do not become effective until September 30, 1997.
If for any fiscal quarter ending on or after September 30, 1997, the debt
service coverage ratio is less that 1.25 to 1, the Company will be required
to pay in six equal monthly installments into a debt service reserve fund
held by the Trustee for the Bonds a total amount equal to the maximum annual
debt service for one year on the Bonds.
(8)
<PAGE> 11
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES
Revenues for the third quarter of 1996 were $50,738,000, down 7% as
compared to revenues of $54,398,000 for the third quarter of the prior year.
Revenues for the nine months of 1996 were $146,112,000, which was a 7%
decline from the revenues for the nine months of 1995 of $156,447,000. The
revenue decline, for the comparative three months and nine months, was the
result of industry-wide pricing pressures and a decrease in the volumes of
wastes which were processed through the Company's facilities.
There are many factors which have impacted, and will continue to
impact, the Company's revenues. These factors include: competitive industry
pricing; continued efforts by generators of hazardous waste to reduce the
amount of hazardous waste they produce; industry-wide over capacity; and
direct shipment by generators of waste to the ultimate treatment or disposal
location. The Company has responded to these industry changes by enhancing
its waste treatment capabilities and improving operating efficiencies. In
the second quarter of 1995, the Company acquired an incinerator in Kimball,
Nebraska which allows the Company to dispose of waste, reducing reliance on
third parties.
On September 30, 1996, the Company had service centers and sales
offices located in 24 states and Puerto Rico, and operated 12 waste
management facilities. The following table sets forth, for the periods
indicated, the Company's revenues by region, based upon the locations of its
service centers as of September 30, 1996.
<TABLE>
Service Center Revenues By Region
For The Seven Quarters Ended September 30, 1996
(in thousands; unaudited)
<CAPTION>
3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96
------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Northeast $19,693 $21,449 $20,275 $21,362 $17,617 $21,159 $22,524
Mid-Atlantic 15,367 16,817 17,317 16,817 13,052 15,720 15,248
Central 7,138 9,450 9,388 8,936 8,920 7,648 7,708
Midwest 4,952 7,183 7,418 5,688 6,147 5,111 5,258
------- ------- ------- ------- ------- ------- -------
Total $47,150 $54,899 $54,398 $52,803 $45,736 $49,638 $50,738
</TABLE>
(9)
<PAGE> 12
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth for the periods indicated certain
operating data associated with the Company's results of operations.
<CAPTION>
Percentage Of Total Revenues
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
--------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues:
Disposal costs paid to third
parties 14.6 13.7 14.3 15.1
Other costs 63.3 62.1 63.3 58.7
------ ------ ------ -------
Total cost of revenues 77.9 75.8 77.6 73.8
Selling, general and administrative
expenses 17.3 18.9 18.6 19.0
Depreciation and amortization
of intangible assets 4.8 4.7 5.1 4.8
Income (loss) from operations 0.0 0.6 (1.3) 2.3
Other Data:
----------
Earnings Before Interest, Taxes,
Depreciation and Amortization
(EBITDA) (in thousands) $2,455 $2,878 $5,531 $11,227
</TABLE>
COST OF REVENUES
One of the largest components of cost of revenues is the cost of
sending waste to other companies for disposal. The Company's outside
disposal costs decreased to 14.3% of revenue in the first nine months of
1996 from 15.1% of revenue in the first nine months of 1995. The primary
reason for the reduction in outside disposal cost was the acquisition of
the Kimball incinerator. The remaining costs increased to 63.3% of
revenue for the three and nine months ended September 30, 1996,
respectively as compared to 62.1% and 58.7% for the same periods of the
prior year. A portion of this increase in "other costs" was associated
with the operating costs of the Kimball incinerator.
(10)
<PAGE> 13
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is continuing to implement cost savings plans to reduce
operating costs. This implementation included a reduction in workforce of
approximately 300 employees since September of 1995. Approximately 160
employees were eliminated in the third quarter of 1996. Another cost savings
program which began in September of 1996 was the CleanEXPRESS program. This
program is directed towards fully utilizing the Company's newly expanded
Chicago facility by shipping waste materials directly from customers'
locations. The cost savings plans are expected to reduce the Company's cost
structure while improving service, quality and competitiveness in the
marketplace.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased 15% to
$8,768,000 for the three months ended September 30, 1996 as compared to
$10,267,000 for the same period of 1995. Selling, general and administrative
expenses decreased 8% to $27,248,000 for the nine months ended September 30,
1996 as compared to $29,748,000 for the same period of 1995. The decline in
expenses represents the Company's continued efforts to control costs in
areas such as the rental of office space and a reduction in administrative
staff. While there continues to be an effort to expand the Company's sales
and marketing capabilities, any increases in these costs have been more than
offset by cost savings programs. The Company does not anticipate any
significant increases for the remainder of 1996 in selling, general and
administrative expenses.
INTEREST EXPENSE
Interest expense increased to $2,362,000 during the third quarter of
1996 from the previous year's interest expense of $2,328,000 for the same
period. Interest expense increased to $6,870,000 during the first nine
months of 1996 from $6,462,000 for the comparable period of the prior year.
The increase in interest expense is due to the average borrowings for the
nine months ended September 1996 being $6 million greater than for the nine
months ended 1995. This increase in debt is primarily due to the costs
associated with the acquisition of the Kimball incinerator. A portion of the
increase in interest expense during 1996 was offset by interest income from
restricted investments.
INCOME TAXES
The effective income tax rate for the three months ended September 30,
1996 was 25% as compared to 41% for the comparable period of 1995. The
effective income tax rate for the nine months ended September 30, 1996 was
32% as compared to 43% for the comparable period of 1995. The rate can
fluctuate significantly depending on the amount of income before taxes, as
compared to the fixed amount of goodwill amortization and other
non-deductible items.
During the ordinary course of its business, the Company is audited by
federal and state tax authorities which may result in proposed assessments.
The Company believes that no current audits or assessments will result in
charges which would be material to results of operations.
(11)
<PAGE> 14
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, the Company and employees acting on behalf of the
Company make forward-looking statements concerning the expected revenues,
results of operations, capital expenditures, capital structure, plans and
objectives of management for future operations, and future economic
performance. This report contains forward-looking statements. There are many
factors which could cause actual results to differ materially from those
projected in a forward-looking statement, and there can be no assurance that
such expectations will be realized.
The Company's future operating results may be affected by a number of
factors, including the Company's ability to: integrate successfully the
CleanEXPRESS program; continue to implement the treatment and disposal
reengineering program; utilize its facilities and workforce profitably, in
the face of intense price competition; successfully increase market share in
its existing service territory while expanding its product offerings into
other markets; integrate additional hazardous waste management facilities,
such as the Kimball incinerator and the expanded Chicago facility; realize
benefits from cost reduction programs; and generate incremental volumes of
waste to be handled through such facilities from existing sales offices and
service centers and others which may be opened in the future.
The future operating results of the Kimball incinerator may be affected
by factors such as its ability to: obtain sufficient volumes of waste at
prices which produce revenue sufficient to offset the operating costs of the
facility; minimize downtime and disruptions of operations; and compete
successfully against other incinerators which have an established share of
the incineration market.
The Company's operations may be affected by the commencement and
completion of major site remediation projects; seasonal fluctuations due to
weather and budgetary cycles influencing the timing of customers' spending
for remedial activities; the timing of regulatory decisions relating to
hazardous waste management projects; changes in the manufacturing sector
towards waste minimization and delays in the remedial market; suspension of
governmental permits; and fines and penalties for noncompliance with the
myriad of regulations governing the Company's diverse operations. As a
result of these factors, the Company's revenue and income could vary
significantly from quarter to quarter, and past financial performance should
not be considered a reliable indicator of future performance.
FINANCIAL CONDITION AND LIQUIDITY
The Company has financed its operations and capital expenditures
primarily by additions to long-term debt. During the nine months ended
September 30, 1996, the Company spent $2,467,000 on additions to plant and
equipment and construction in progress, as compared to its capital
expenditures of $5,998,000 during the same period of the prior year, during
which the Company also spent $5,550,000 on the acquisition of the Kimball
incinerator. During the nine months ended September 30, 1996, net additions
to long-term debt were $4,069,000, as compared to net additions to long-term
debt of $14,942,000 during the same period of the previous year. During the
three months ended September 30, 1996 the Company received $753,000 from the
sale of an office building.
(12)
<PAGE> 15
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
During the third quarter of 1996, the Company refinanced its
$45,000,000 revolving credit and term loan agreement (the "Loan Agreement")
with a financial institution by (i) guaranteeing $10,000,000 of 10.75%
Economic Development Revenue Bonds due September 1, 2026 issued by the City
of Kimball, Nebraska (the "Bonds"), and (ii) amending the Loan Agreement to
reduce the maximum credit thereunder from $45,000,000 to $35,000,000. The
Company used the net proceeds from the sale of the Bonds to repay a portion
of its outstanding debt under the Loan Agreement. That portion was
originally incurred to pay for a portion of the costs of the Kimball
incinerator and landfill, including the prepaid closure insurance programs,
as well as the costs of improvements to the facility.
As amended, the Loan Agreement provides for a $24,500,000 revolving
credit portion (the "Revolver") and a $10,500,000 term loan portion. The
Loan Agreement allows the Company to make regularly scheduled payments of
principal and interest on its other indebtedness for borrowed money
(including capital leases), to pay dividends in cash on its preferred stock,
to prepay such debt or redeem such preferred stock, and to make acquisitions
of other companies, provided that on each of the sixty consecutive days
prior thereto, and after giving effect thereto, the Company shall maintain
borrowing availability in excess of $4,500,000. The Company received from
its lender a waiver for compliance with the Loan Agreement covenant
requiring $4,500,000 of excess availability, which was granted through
November 1996. The Company is continuing to renegotiate some of the terms of
the Loan Agreement.
Dividends on the Company's Series B Convertible Preferred Stock are
payable on the 15th day of January, April, July and October, at the rate of
$1.00 per share, per quarter; 112,000 shares are outstanding. Under the
terms of the preferred stock, the Company can elect to pay dividends in cash
or in common stock with a market value equal to the amount of the dividend
payable. The Company elected to pay the 1996 dividends in common stock.
Accordingly, the Company has issued a total of 118,493 shares of common
stock to the holders of the preferred stock for the year. The Company
anticipates that the preferred stock dividends payable through 1996 will be
paid in common stock.
The Company believes it has adequate liquidity for its ongoing
operations and planned capital needs. It is expected that capital
expenditures in 1996 will be approximately $3,000,000.
(13)
<PAGE> 16
CLEAN HARBORS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
--------------------------
No reportable events have occurred which would require modification of
the discussion under Item 3 - Legal Proceedings contained in the Company's
Report on Form 10-K for the Year Ended December 31, 1995.
ITEM 2 - CHANGES IN SECURITIES
------------------------------
None
ITEM 3 - DEFAULTS UPON SENIOR DEBT
----------------------------------
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None
ITEM 5 - OTHER INFORMATION
--------------------------
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
A) Exhibit 4.9 - Third Amendment to Financing Agreements dated
September 6, 1996 by and between Congress Financial
Corporation (New England), the Company's Subsidiaries as
Borrowers, and Clean Harbors, Inc. as Guarantor.
Exhibit 11 - Computation of Net Income per Share.
Exhibit 27 - Financial Data Schedule.
B) Reports on Form 8-K - None
(14)
<PAGE> 17
CLEAN HARBORS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Clean Harbors, Inc.
-----------------------------------
Registrant
Dated: November 13, 1996 By: /s/ Alan S. McKim
-----------------------------------
Alan S. McKim
President and
Chief Executive Officer
Dated: November 13, 1996 By: /s/ Donald N. Leef
-----------------------------------
Donald N. Leef
Vice President, Treasurer and
Chief Financial Officer
(15)
<PAGE> 1
EXHIBIT 4.9
September 6, 1996
CLEAN HARBORS ENVIRONMENTAL
SERVICES, INC.
CLEAN HARBORS TECHNOLOGY
CORPORATION
CLEAN HARBORS KINGSTON FACILITY
CORPORATION
CLEAN HARBORS OF BRAINTREE, INC.
CLEAN HARBORS SERVICES, INC.
CLEAN HARBORS OF NATICK, INC.
CLEAN HARBORS OF CONNECTICUT, INC.
MURPHY'S WASTE OIL SERVICE, INC.
CLEAN HARBORS OF CLEVELAND, INC.
MR. FRANK, INC.
SPRING GROVE RESOURCE RECOVERY, INC.
Re: Third Amendment to Financing Agreements - Issuance of City of Kimball,
Nebraska Economic Development Revenue Bonds ("Third Amendment")
---------------------------------------------------------------
Gentlemen:
Reference is made to the Loan and Security Agreement dated May 8, 1995, as
amended, between you and the undersigned (the "Loan Agreement"). All capitalized
terms not otherwise defined herein shall have the meanings given such terms in
the Loan Agreement.
Borrowers have arranged for the issuance of $10,000,000 of City of
Kimball, Nebraska Economic Development Revenue Bonds (Clean Harbors, Inc.),
Series 1996 (the "Bonds"), the proceeds of which will reimburse the Borrowers
for costs incurred in connection with the Kimball, Nebraska waste disposal
facility (the "Facility") owned by Clean Harbors Technology Corporation
("CHTC"). The proceeds of the Bonds less certain costs of issuance will be
$9,800,000. Upon such issuance, not less than $9,300,000 in proceeds are to be
immediately paid to the Lender and applied to the Obligations and up to $500,000
of additional proceeds will be subject to certain escrow conditions and will be,
once released by the Trustee for the Bonds, paid to Lender and applied to the
Obligations. In connection with the issuance of the Bonds, Borrowers have
requested that certain amendments be made in the Loan Agreement. Subject to the
terms and conditions hereof, the Lender agrees with the Borrowers as follows:
(1) Section 1.31 of the Loan Agreement is deleted in its entirety and
replaced with the following:
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<PAGE> 2
"1.31 "Maximum Credit" shall mean $35,000,000.00.
(2) Section 1.48 of the Loan Agreement is deleted in its entirety and
replaced with the following:
"1.48 "Revolving Credit Limit" shall mean the amount of
$24,500,000.00."
(3) Notwithstanding the provisions of Section 9.8, the Lender consents to
the lease and leaseback of the Facility by CHTC pursuant to a certain Facilities
Lease (the "Facilities Lease") and Lease Agreement (the "Lease") between CHTC
and the City of Kimball, Nebraska, each dated as of September 1, 1996; provided,
that no mortgage, security interest or lien on the Facility or the assets of
CHTC, the Parent or the other Borrowers is granted to secure the repayment of
the Lease or the Bonds (other than a debt service reserve which the Parent and
Borrowers may be required to be fund with the Trustee under certain
circumstances for up to one year of maximum debt service on the Bonds) and the
Facilities Lease and Lease shall in all respects be subject to the Mortgage of
the Lender on the Facility and the real estate on which the Facility is located.
The Borrowers further covenant and agree that upon release from escrow of the
additional Bond proceeds and any release of funds from the above-described debt
service reserve or any other account maintained in respect of the Bonds or
Lease, Borrowers shall cause such funds to be paid to the Payment Account.
(4) Notwithstanding the provisions of Section 9.9 and 9.10, the Lender
consents (a) to CHTC incurring the obligations under the Lease Agreement and (b)
to the other Borrowers and the Parent guarantying the obligations of CHTC
pursuant to the Lease Agreement; provided, that such obligations and guaranties
are and remain unsecured (except to the extent of the debt service reserve fund
described above) and subject to the provisions of Section 9.9.
(5) Section 10.1 is amended by deleting the period at the end of clause
(o), inserting "; or" in place thereof and adding the following clause to the
end thereof as clause (p):
"(p) there shall be a default under the Lease Agreement dated as of
September 1, 1996 between the CHTC and the City of Kimball, Nebraska or the City
of Kimball, Nebraska Economic Development Bonds (Clean Harbors, Inc.) Series,
1996 or under any of the agreements, instruments or documents relating thereto."
(6) This Third Amendment and the Lender's obligations hereunder shall not
be effective until each of the following conditions are satisfied:
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<PAGE> 3
(a) The Bonds will be duly issued, all documentation necessary
therefor executed and delivered and all conditions thereto satisfied without
amendment or waiver and all of the proceeds thereof that are not subject to
escrow with the Trustee and, in any event, not less than $9,300,000, shall be
paid to Lender;
(b) all requisite corporate action and proceedings of the Borrowers
in connection with this Third Amendment shall be satisfactory in form and
substance to Lender and Lender shall receive certified copies of such corporate
action and proceedings as Lender may request; and
(c) Lender shall have received in form and substance satisfactory to
Lender, an opinion of counsel to Borrowers with respect to this Third Amendment.
(7) Each Borrower confirms and agrees that (a) all representations and
warranties contained in the Loan Agreement and in the other Financing Agreements
are on the date hereof true and correct in all material respects (except for
changes that have occurred as permitted by the covenants in Section 9 of the
Loan Agreement or as permitted under this Third Amendment), and (b) it is
unconditionally and jointly and severally liable for the punctual and full
payment of all Obligations, including, without limitation, all charges, fees,
expenses and costs (including attorneys' fees and expenses) under the Financing
Agreements, and that no Borrower has any defenses, counterclaims or setoffs with
respect to full, complete and timely payment of all Obligations.
(8) Each Guarantor, for value received, hereby assents to the Borrowers'
execution and delivery of this Amendment, and to the performance by the
Borrowers of their respective agreements and obligations hereunder. This
Amendment and the performance or consummation of any transaction or matter
contemplated under this Amendment, shall not limit, restrict, extinguish or
otherwise impair any of the Guarantor's liability to Lender with respect to the
payment and other performance obligations of the Guarantors pursuant to the
Guarantees, dated May 8, 1995 executed for the benefit of Lender. Each Guarantor
acknowledges that it is unconditionally liable to Lender for the full and
complete payment of all Obligations including, without limitation, all charges,
fees, expenses and costs (including attorney's fees and expenses) under the
Financing Agreements and that such Guarantor has no defenses, counterclaims or
setoffs with respect to full, complete and timely payment of any and all
Obligations.
(9) Borrowers hereby agree to pay to Lender all reasonable attorney's fees
and costs which have been incurred or may in the future be incurred by Lender in
connection with the negotiation and preparation of this Amendment and any other
documents and agreements prepared in connection with this Amendment. The
undersigned confirm that the Financing Agreements remain in full force and
effect without amendment or modification of any kind, except for the amendments
explicitly set forth herein. The undersigned further confirm that no Event of
Default or events which with notice or the passage of time or both would
constitute an Event of Default have occurred and are continuing. The execution
and delivery of this Amendment by Lender shall not be
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<PAGE> 4
construed as a waiver by Lender of any Event of Default under the Financing
Agreements. This Amendment shall be deemed to be a Financing Agreement and,
together with the other Financing Agreements, constitute the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior dealings, correspondence, conversations or communications between the
parties with respect to the subject matter hereof.
If you accept and agree to the foregoing please sign and return the
enclosed copy of this letter. Thank you.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(NEW ENGLAND)
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
4
<PAGE> 5
AGREED:
- -------
CLEAN HARBORS ENVIRONMENTAL
SERVICES, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
CLEAN HARBORS TECHNOLOGY
CORPORATION
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
CLEAN HARBORS KINGSTON FACILITY
CORPORATION
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
CLEAN HARBORS OF BRAINTREE, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
CLEAN HARBORS SERVICES, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
CLEAN HARBORS OF NATICK, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
5
<PAGE> 6
CLEAN HARBORS OF CONNECTICUT, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
MURPHY'S WASTE OIL SERVICE, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
CLEAN HARBORS OF CLEVELAND, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
MR. FRANK, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
SPRING GROVE RESOURCE RECOVERY, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
CLEAN HARBORS, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
6
<PAGE> 7
CLEAN HARBORS OF BALTIMORE, INC.
By:
----------------------------------
Name: Stephen Moynihan
Title: Vice President
7
<PAGE> 1
EXHIBIT 11
CLEAN HARBORS, INC. AND SUBSIDIARIES
<TABLE>
COMPUTATION OF NET INCOME PER SHARE
FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1996
(in thousands)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net loss $(1,742) $(1,200) $(5,989) $(1,587)
Plus preferred dividends accrued 112 112 336 335
------- ------- ------- -------
Adjusted net loss $(1,854) $(1,312) $(6,325) $(1,922)
======= ======= ======= =======
Loss per common and common equivalent share:
Weighted average number of
shares outstanding 9,685 9,435 9,623 9,433
Incremental shares for stock options
under treasury stock method -- -- -- --
------- ------- ------- -------
Weighted average number of
common and common equivalent
shares outstanding 9,685 9,435 9,623 9,433
Loss per common and common
equivalent share $ (.19) $ (.14) $ (.66) $ (.20)
======= ======= ======= =======
Loss per common and common equivalent
share - assuming full dilution:
Weighted average number of
shares outstanding 9,685 9,435 9,623 9,433
Incremental shares for stock options
under treasury stock method -- -- -- --
------- ------- ------- -------
Weighted average number of common
and common equivalent shares outstanding -
assuming full dilution 9,685 9,435 9,623 9,433
======= ======= ======= =======
Loss per common and common
equivalent share - assuming
full dilution $ (.19) $ (.14) $ (.66) $ (.20)
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 550
<SECURITIES> 1,921
<RECEIVABLES> 44,514
<ALLOWANCES> (1,114)
<INVENTORY> 2,894
<CURRENT-ASSETS> 58,082
<PP&E> 129,748
<DEPRECIATION> 59,603
<TOTAL-ASSETS> 173,237
<CURRENT-LIABILITIES> 45,189
<BONDS> 73,575
<COMMON> 97
0
1
<OTHER-SE> 54,375
<TOTAL-LIABILITY-AND-EQUITY> 173,237
<SALES> 146,112
<TOTAL-REVENUES> 146,112
<CGS> 113,333
<TOTAL-COSTS> 113,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,870
<INCOME-PRETAX> (8,771)
<INCOME-TAX> (2,782)
<INCOME-CONTINUING> (5,989)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,989)
<EPS-PRIMARY> (.66)
<EPS-DILUTED> 0
</TABLE>
