<PAGE>
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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, 1999
-----------------------
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 02184-7599
(Address of Principal Executive Offices) (Zip Code)
(781) 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 10,798,037
- ------------------------------------- ---------------------------------
(Class) (Outstanding at November 3, 1999)
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<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1: FINANCIAL STATEMENTS PAGES
-------
<S> <C>
Consolidated Statements of Operations 1
Consolidated Balance Sheets 2-3
Consolidated Statements of Cash Flows 4-5
Consolidated Statement of Stockholders' Equity 6
Notes to Consolidated Financial Statements 7-11
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 12-23
PART II: OTHER INFORMATION
Items No. 1 through 6 24
Signatures 25
</TABLE>
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(in thousands except for earnings per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 54,602 $ 50,884 $ 150,368 $ 144,851
Cost of revenues 39,829 37,693 110,736 108,012
Selling, general and administrative
expenses 9,730 9,597 27,478 26,674
Depreciation and amortization 2,408 2,287 7,047 6,823
--------- --------- --------- ---------
Income from operations 2,635 1,307 5,107 3,342
Interest expense, net 2,306 2,352 6,735 7,010
--------- --------- --------- ---------
Income (loss) before provision for
income taxes 329 (1,045) (1,628) (3,668)
Provision for income taxes 12 90 192 270
--------- --------- --------- ---------
Net income (loss) $ 317 $ (1,135) $ (1,820) $ (3,938)
========= ========= ========= =========
Basic and fully diluted earnings (loss)
per share $ 0.02 $ (0.12) $ (0.20) $ (0.42)
========= ========= ========= =========
Weighted average common
shares outstanding 10,689 10,354 10,685 10,271
========= ========= ========= =========
Weighted average common
shares plus potentially dilutive
common shares 10,695 10,354 10,685 10,271
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(1)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(Unaudited)
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,219 $ 1,895
Restricted investments 1,096 2,366
Accounts receivable, net of allowance for doubtful
accounts of $1,333 and $1,013, respectively 46,547 41,409
Prepaid expenses 1,676 939
Supplies inventories 2,839 2,858
Income tax receivable 1,315 1,236
------------- ------------
Total current assets 55,692 50,703
------------- ------------
Property, plant and equipment:
Land 8,478 8,182
Buildings and improvements 39,988 39,521
Vehicles and equipment 82,541 79,430
Furniture and fixtures 2,215 2,190
Construction in progress 2,550 967
------------- ------------
135,772 130,290
Less - Accumulated depreciation
and amortization 78,854 73,157
------------- ------------
Net property, plant and equipment 56,918 57,133
------------- ------------
Other assets:
Goodwill, net 19,758 20,031
Permits, net 12,810 13,322
Other 4,225 4,721
------------- ------------
Total other assets 36,793 38,074
------------- ------------
Total assets $149,403 $145,910
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(2)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(Unaudited)
------------- ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations $ 2,300 $ 4,100
Accounts payable 17,822 17,998
Accrued disposal costs 6,566 6,335
Other accrued expenses 13,357 10,975
Income tax payable 32 50
--------- ---------
Total current liabilities 40,077 39,458
--------- ---------
Long-term obligations, less current maturities 73,518 68,774
Other 1,233 1,368
--------- ---------
Total other liabilities 74,751 70,142
--------- ---------
Commitments and contingencies
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 (liquidation
preference of $5,600,000) 1 1
Common Stock, $.01 par value
Authorized-20,000,000 shares;
Issued and outstanding-10,694,659 and
10,420,874 shares, respectively 107 104
Additional paid-in capital 61,102 60,670
Accumulated other comprehensive loss (24) (10)
Accumulated deficit (26,611) (24,455)
--------- ---------
Total stockholders' equity 34,575 36,310
--------- ---------
Total liabilities and stockholders' equity $ 149,403 $ 145,910
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(3)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,820) $(3,938)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 7,047 6,823
Allowance for doubtful accounts 512 519
Amortization of deferred financing costs 259 406
Changes in assets and liabilities:
Accounts receivable (5,395) (6,342)
Refundable income taxes (79) 433
Prepaid expenses (740) (339)
Supplies inventories 19 (208)
Other assets 496 (26)
Accounts payable (176) 2,545
Accrued disposal costs 231 (39)
Other accrued expenses 2,382 (485)
Taxes payable (18) 80
Other liabilities (135) (209)
------- -------
Net cash provided by (used in) operating activities 2,583 (780)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (4,398) (2,990)
Acquisition (1,900) --
Proceeds from sale and maturities of
restricted investments 1,255 113
Purchase of restricted investments -- (1,282)
Proceeds from sale of fixed assets -- 24
------- -------
Net cash used in investing activities (5,043) (4,135)
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(4)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1999 1998
--------- --------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under long-term revolver 296 5,120
Additional borrowings under term note 4,139 --
Payments on long-term obligations (1,750) (2,253)
Additions to deferred financing cost -- (15)
Proceeds from employee stock purchase plan 99 98
------- -------
Net cash provided by financing activities 2,784 2,950
------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 324 (1,965)
Cash and cash equivalents, beginning of year 1,895 3,935
------- -------
Cash and cash equivalents, end of period $ 2,219 $ 1,970
======= =======
Supplemental information:
Non cash investing and financing activities:
Stock dividend on preferred stock $ 336 $ 336
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(5)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
Series B
Preferred Stock Common Stock
--------- ----------- --------- ---------
Number of $0.01 Par Number of $0.01 Par
Shares Value Shares Value
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1998 112 $ 1 10,421 $ 104
Net loss -- -- -- --
Other comprehensive income, net of tax:
Unrealized holding losses arising during
the period -- -- -- --
Reclassification adjustment for
gains (losses) included in net loss -- -- -- --
Other comprehensive loss -- -- -- --
Comprehensive loss -- -- -- --
Preferred stock dividends:
Series B -- -- 202 2
Employee stock purchase plan -- -- 72 1
-------- -------- -------- --------
Balance at September 30, 1999 112 $ 1 10,695 $ 107
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Paid-in Comprehensive Comprehensive Accumulated Stockholders'
Capital Loss Loss Deficit Equity
---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 $ 60,670 -- $ (10) $(24,455) $ 36,310
Net loss -- $ (1,820) -- (1,820) (1,820)
Other comprehensive income, net of tax:
Unrealized holding losses arising during
the period -- (14) -- -- --
Reclassification adjustment for
gains (losses) included in net loss -- -- -- -- --
--------
Other comprehensive loss -- (14) (14) -- (14)
--------
Comprehensive loss -- $ (1,834) -- -- --
Preferred stock dividends: ========
Series B 334 -- -- (336) --
Employee stock purchase plan 98 -- -- -- 99
-------- -------- -------- -------- --------
Balance at September 30, 1999 $ 61,102 -- $ (24) $(26,611) $ 34,575
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(6)
<PAGE>
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 statement of results of interim periods. The operating results for the
three and nine months ended September 30, 1999 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, 1998 as filed with the
Securities and Exchange Commission.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Capitalization of Software Developed Internally
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1"), effective for periods
beginning after December 15, 1998. SOP 98-1 provides guidance on defining
internal use software and the accounting for the costs thereof. The adoption of
this statement in the period ended March 31, 1999 did not have a significant
effect on the Company's results of operations or its financial position.
NOTE 3 ACQUISITION
On May 25, 1999, the Company acquired the assets of the Texas
Transportation and Brokerage Divisions of American Ecology Environmental
Services Corporation for a cash price of $1,900,000. The divisions operate out
of locations in Dallas, Houston and Corpus Christi, Texas. The divisions provide
waste management services primarily to small quantity generators throughout
Texas and transportation services for both solid and liquid wastes. This
acquisition has been accounted for under the purchase method of accounting. The
purchase price has been allocated based on estimated fair values of assets
acquired at the date of acquisition. The acquisition resulted in $272,000 of
acquired goodwill, which is being amortized on the straight-line basis over 20
years. The results of the acquired businesses have been included in the
consolidated financial statements since the acquisition date. The acquisition
did not materially affect revenues or results from operations for the three and
nine months ended September 30, 1999.
Assuming this acquisition had occurred January 1, 1998, consolidated,
pro forma revenues, net income (loss) and earnings (loss) per share would not
have been materially different than the amounts reported for the three and nine
months ended September 30, 1999 and 1998. Such unaudited pro forma amounts are
not indicative of what the actual consolidated results of operations might have
been if the acquisition had been effective at the beginning of 1998.
(7)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 FINANCING ARRANGEMENTS
As described in the Form 10-K for the year ended December 31, 1998, the
Company had a $35,000,000 Loan Agreement which consisted of a revolving credit
agreement (the "Revolver") and a term promissory note (the "Term Note"). In May
1999, the Term Note was amended. The Term Note as amended allowed the Company
to increase the amount borrowed under the Term Note by $4,139,000 from the
$1,861,000 owed prior to the amendment of the Term Note to the $6,000,000
principal amount of Term Note as amended. The Term Note as amended is payable
in monthly installments of $100,000 through May 2004. The other terms and
conditions of the Term Note remained substantially the same.
In May 1999, the due date of the Revolver was extended from May 8, 2000
to May 8, 2001 under substantially the same terms and conditions. The Revolver
allows the Company to borrow up to $24,500,000 in cash and letters of credit,
based on a formula of eligible accounts receivable. At September 30, 1999, the
Revolver balance was $10,218,000, letters of credit outstanding were $6,300,000
and funds available to borrow were approximately $7,982,000.
The Loan Agreement has covenants that require, among others,
maintenance of a minimum level of working capital and adjusted net worth. At
September 30, 1999, the Loan Agreement required minimum amounts of working
capital and adjusted net worth of $6,000,000 and $33,000,000, respectively. At
September 30, 1999, the Company had working capital and adjusted net worth of
$15,615,000 and $35,575,000, respectively. The Company must also maintain
borrowing availability of not less than $4,500,000 for sixty consecutive days
prior to paying principal and interest on its other indebtedness and dividends
in cash on its preferred stock. In the first half of 1999, the Company violated
this covenant, which was waived by the financial institution through May 15,
1999. Since May 15, 1999, the Company has been in compliance with this
covenant.
In addition, the Indenture under which the Company has outstanding
$10,000,000 of industrial revenue bonds (the "Bonds") contains certain covenants
the most restrictive of which require the Company maintain a rolling four
quarter ratio of earnings before interest, income taxes, depreciation and
amortization (EBITDA) to total debt service of 1.25 to 1. At December 31, 1997
the debt service coverage ratio was 1.04 to 1. Under the terms of the Bonds, the
deficiency in the debt coverage ratio did not and will not result in a default,
but the Company was required to pay into a debt service reserve fund held by the
Trustee for the Bonds a total amount equal to the annual debt service for one
year on the Bonds. Through March 31, 1999, the Company had paid $1,075,000 into
this fund, as required. Under the terms of the Bonds, the Company can request
that the balance of the debt service reserve fund be returned to the Company if
a debt service coverage ratio of 1.50 to 1 is met for two consecutive quarters.
(8)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 FINANCING ARRANGEMENTS (CONTINUED)
For the quarters ended March 31, 1999 and December, 31, 1998, the debt service
coverage ratios were 1.68 and 1.58, respectively. In May 1999, the Trustee for
the Bonds returned the balance of the debt service reserve fund to the Company.
The balance of the debt service reserve fund was reflected as a component of
restricted cash at December 31, 1998. At September 30, 1999, the debt service
coverage ratio of 1.66 to 1 was greater than the 1.25 to 1 required.
NOTE 5 INCOME TAXES
SFAS 109, "Accounting for Income Taxes," requires that a valuation
allowance be established when, based on an evaluation of objective verifiable
evidence, there is a likelihood that some portion or all of the deferred tax
assets will not be realized. The Company continually reviews the adequacy of the
valuation allowance for deferred tax assets, and in 1997, based upon this
review, the valuation allowance was increased to cover substantially all net
deferred tax assets. Accordingly, no benefit has been recorded on its books for
the future potential value of net operating loss carryforwards for the three and
nine months ended September 30, 1998 and 1999. The actual realization of the net
operating loss carryforwards and other tax assets depend on having future
taxable income of the appropriate character prior to their expiration. If the
Company reports earnings from operations in the future, and depending on the
level of these earnings, some portion or all of the valuation allowance would be
reversed, which would increase net income reported in future periods.
During the ordinary course of its business, the Company is audited by
federal and state tax authorities which may result in proposed assessments. In
1996, the Company received a notice of intent to assess state income taxes from
one of the states in which it operates. The case is currently undergoing
administrative appeal. If the Company loses the administrative appeal, the
Company may be required to make a payment of approximately $3,000,000 to the
state. The Company cannot currently predict when the decision for the
administrative appeal will be made. The Company believes that it has properly
reported its state income and intends to contest the assessment vigorously.
While the Company believes that the final outcome of the dispute will not have a
material adverse effect on the Company's financial condition or results of
operations, no assurance can be given as to the final outcome of the dispute,
the amount of any final adjustments or the potential impact of such adjustments
on the Company's financial condition or results of operations.
(9)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 EARNINGS (LOSS) PER SHARE
The following is a reconciliation of basic and diluted earnings (loss)
per share computations (in thousands except for per share amounts):
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999
-----------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Earnings
----------- ------------- ----------
<S> <C> <C> <C>
Net income $ 317
Less preferred dividends 112
----------- ------------- ----------
Basic EPS
(income available to shareholders) 205 10,689 $ 0.02
Effect of dilutive securities
Options -- 6 --
----------- ------------- ----------
Diluted EPS
Income available to common
stockholders plus assumed conversions $ 205 10,695 $ 0.02
=========== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
-------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Loss
----------- ------------- ----------
<S> <C> <C> <C>
Net loss $(1,135)
Less preferred dividends 112
------- ------- -----
Basic and diluted EPS
(loss available to shareholders) $(1,247) 10,354 $ (0.12)
======= ======= =====
</TABLE>
(10)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 EARNINGS (LOSS) PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
--------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Loss
----------- ------------- -----------
<S> <C> <C> <C>
Net loss $(1,820)
Less preferred dividends 336
----------- ------------- -----------
Basic and diluted EPS
(loss available to shareholders) $(2,156) 10,685 $ (0.20)
=========== ============= ===========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
--------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Loss
----------- ------------- ----------
<S> <C> <C> <C>
Net loss $(3,938)
Less preferred dividends 336
------- ------- ------
Basic and diluted EPS
(loss available to shareholders) $(4,274) 10,271 $(0.42)
======= ======= ======
</TABLE>
The Company has issued options, warrants and convertible preferred
stock which are potentially dilutive to earnings. For the three months ended
September 30, 1999, some of the options outstanding but none of the warrants or
convertible preferred stock are dilutive to earnings. Only those options where
the options' exercise price was less than the average market price of the common
shares for the period are included in the above calculations. For the other
periods presented, the options, warrants and convertible stock outstanding have
not been included in the above calculations, since their inclusion would have
been antidilutive for the periods.
(11)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report contains
forward-looking statements, which are generally identifiable by use of the words
"believes," "expects," "intends," "anticipates," "plans to," "estimates,"
"projects," or similar expressions. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those reflected in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Factors That May Affect Future
Results." Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's opinions only as of the
date hereof. The Company undertakes no obligation to revise or publicly release
the results of any revision to these forward-looking statements. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain
operating data associated with the Company's results of operations.
<TABLE>
<CAPTION>
Percentage of Total Revenues
-----------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
1999 1998 1999 1998
------ ------ ------ -------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues:
Disposal costs paid to third parties 12.4 15.0 12.9 14.2
Other costs 60.6 59.0 60.7 60.4
------ ------ ------ -------
Total cost of revenues 73.0 74.0 73.6 74.6
Selling, general and administrative
expenses 17.8 18.9 18.3 18.4
Depreciation and amortization
of intangible assets 4.4 4.5 4.7 4.7
------ ------ ------ -------
Income from operations 4.8% 2.6% 3.4% 2.3%
====== ====== ====== =======
</TABLE>
(12)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1999 1998 1999 1998
-------- ------- --------- -------
<S> <C> <C> <C> <C>
Other Data:
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) (in thousands) $ 5,043 $ 3,594 $12,154 $10,165
</TABLE>
REVENUES
Revenues for the third quarter of 1999 were $54,602,000, up
compared to revenues of $50,884,000 for the same quarter of the prior year, an
increase of $3,718,000 or 7.3%. The primary cause of the increase in revenues
was due to an increase in site service work performed. Revenues also increased
due to increases in CleanPack (R) and transportation revenues. Partially
offsetting these increases in revenues was a decrease in revenues due to a 4.8%
decrease in pricing on waste processed through the Company's facilities. The
volume of waste processed through the Company's facilities was flat as compared
to the same period of the prior year.
Revenues for the first nine months of 1999 were $150,368,000, up
compared to revenues of $144,851,000 for the same period of the prior year,
an increase of $5,517,000 or 3.8%. The primary cause of the increase in
revenues was an increase in site services work performed. Revenues also
increased due to increases in CleanPack (R) and transportation revenues.
Partially offsetting these increases in revenues was a decrease in revenues
due to a 3.6% decrease in pricing on waste processed through the Company's
facilities. Revenues also decreased due to a 1.7% decrease in the volume of
waste processed through the Company's facilities for the nine months ended
September 30, 1999 as compared to the same period of the prior year. The
decrease in the volume of waste processed through the Company's facilities
was primarily due to the Company's decision to increase the selling prices on
certain waste streams that were determined to be unprofitable or only
marginally profitable.
(13)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
There are many factors which have impacted, and 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; significant consolidation among treatment and
disposal companies; industry-wide over capacity; and direct shipment by
generators of waste to the ultimate treatment or disposal location.
COST OF REVENUES
Cost of revenues were $39,829,000 for the three months ended
September 30, 1999 as compared to $37,693,000 for the three months ended
September 30, 1998, an increase of $2,136,000 or 5.7%. As a percentage of
revenues, cost of revenues decreased from 74.0% for the three months ended
September 30, 1998 to 73.0% for the three months ended September 30, 1999.
One of the largest components of cost of revenues is the cost of sending
waste to other companies for disposal. Disposal costs paid to third parties
as a percentage of revenue declined from 15.0% for the three months ended
September 30, 1998 to 12.4% for the three months ended September 30, 1999.
This decrease was primarily achieved through the internalization of waste
disposal and due to a change in the mix of revenues. Other costs of revenues
as a percentage of revenues increased from 59.0% for the three months ended
September 30, 1998 to 60.6% for the three months ended September 30, 1999.
This increase was primarily due to the change in the mix of revenues where
site services revenue was a larger component of total revenues.
Cost of revenues were $150,368,000 for the nine months ended
September 30, 1999 as compared to $144,851,000 for the nine months ended
September 30, 1998, an increase of $5,517,000 or 3.8%. As a percentage of
revenues, cost of revenues decreased from 74.8% for the nine months ended
September 30, 1998 to 73.6% for the nine months ended September 30, 1999.
Disposal costs paid to third parties as a percentage of revenue declined from
14.2% for the nine months ended September 30, 1998 to 12.9% for the nine
months ended September 30, 1999. This decrease was primarily due to the
internalization of waste disposal and the reduced volumes of waste handled by
the Company in the nine months ended September 30, 1999 as compared to the
same period of the prior year. Other costs of revenues as a percentage of
revenues increased from 60.4% for the nine months ended September 30, 1998 to
60.7% for nine months ended September 30, 1999. This increase was primarily
due to the change in the mix of revenues where site services revenue was a
larger component of total revenues.
(14)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COST OF REVENUES (CONTINUED)
The Company believes that its ability to manage operating costs is an
important factor in its ability to remain price competitive. During the first
quarter of 1999, the Company commenced a strategic sourcing initiative in order
to reduce operating costs by identifying suppliers that are able to supply goods
and services at lower costs, by obtaining volume discounts where the Company is
currently purchasing goods and services from various suppliers and consolidating
these purchases with a small number of suppliers, and by reducing the internal
costs of purchasing goods and services by reducing the number of suppliers that
the Company uses through reducing the number of purchase orders that must be
prepared and invoices that must be processed. No assurance can be given that the
Company's efforts to manage future operating expenses will be successful.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased from $9,597,000
for the three months ended September 30, 1998 to $9,730,000 for the three months
ended September 30, 1999, an increase of $133,000 or 1.4%. The largest
components of the increase resulted from increases in headcount due to higher
levels of revenues, increases in headcount in sales and marketing due to
strategic business initiatives and increases in compensation to remain
competitive in the employment markets in which the Company operates. Expenses
relating to information technologies increased due to initiatives to improve the
quality of management information. Partially offsetting these increases were
decreases achieved across a number of expense categories through cost
reductions.
Selling, general and administrative expenses increased to $27,478,000
for the nine months ended September 30, 1999 from $26,674,000 for the nine
months ended September 30, 1998, an increase of $804,000 or 3.0%. The largest
components of the increase were due to increases in headcount due to higher
levels of revenues, increases in headcount in sales and marketing due to
strategic business initiatives and increases in compensation to remain
competitive in the employment markets in which the Company operates. Expenses
relating to information technologies increased due to initiatives to improve the
quality of management information. The Company also experienced increases in
non-payroll sales and marketing expenses related to sales initiatives. Partially
offsetting these increases were cost reductions achieved across a number of
categories, an offset to expense of $320,000 relating to the settlement with the
City of Chicago and the non-recurrence of costs incurred in 1998 to terminate
leases.
(15)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTEREST EXPENSE, NET
Interest expense net of interest income was $2,306,000 for the third
quarter of 1999 as compared to $2,352,000 for the third quarter of 1998. The
decrease in interest expense was primarily due to a decrease in the average
balance of loans outstanding, which primarily resulted from fluctuations of
amounts outstanding on the Revolver.
Interest expense net of interest income was $6,735,000 for the first
nine months of 1999 as compared to $7,010,000 for the same period of 1998. The
decrease in interest expense was primarily due to a decrease in the average
balance of loans outstanding, which primarily resulted from fluctuations of
amounts outstanding on the Revolver.
INCOME TAXES
For the three months ended September 30, 1999, income tax expense
of $12,000 was recorded on pre-tax income of $329,000 for an effective tax
rate of 3.6%, as compared to the same period of the prior year where tax
expense of $90,000 was recorded on pre-tax loss of $(1,045,000) for an
effective tax rate of (8.6)%. For the nine months ended September 30, 1999,
income tax expense of $192,000 was recorded on pre-tax loss of $(1,628,000)
for an effective tax rate of (11.7)%, as compared to the same period of the
prior year where tax expense of $270,000 was recorded on pre-tax loss of
$(3,668,000) for an effective tax rate of (7.4)%. Income tax expense for the
periods ended September 30 consists primarily of tangible property taxes and
net worth taxes that are levied as a component of state income taxes.
Partially offsetting these taxes for the three and nine months ended
September 30, 1999 was a $79,000 federal income tax refund that was filed for
in September 1999.
SFAS 109, "Accounting for Income Taxes," requires that a valuation
allowance be established when, based on an evaluation of objective verifiable
evidence, there is a likelihood that some portion or all of the deferred tax
assets will not be realized. The Company continually reviews the adequacy of
its valuation allowance for deferred tax assets, and in 1997, based on this
review, the valuation allowance was increased to cover substantially all net
deferred tax assets. Accordingly, no benefit has been recorded on its books
for the future potential value of net operating loss carryforwards for the
three and nine months ended September 30, 1998 and 1999. The actual
realization of the net operating loss carryforwards and other tax assets will
depend on having future taxable income of the appropriate character prior to
their expiration under the tax laws. If the Company reports earnings from
operations in the future, and depending on the level of these earnings, some
portion or all of the valuation allowance would be reversed, which would
increase net income reported in future periods.
(16)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INCOME TAXES (CONTINUED)
During the ordinary course of its business, the Company is audited by
federal and state tax authorities which may result in proposed assessments. In
1996, the Company received a notice of intent to assess state income taxes from
one of the states in which it operates. The case is currently undergoing
administrative appeal. If the Company loses the administrative appeal, the
Company may be required to make a payment of approximately $3,000,000 to the
state. The Company cannot currently predict when the decision for the
administrative appeal will be made. The Company believes that it has properly
reported its state income and intends to contest the assessment vigorously.
While the Company believes that the final outcome of the dispute will not have a
material adverse effect on the Company's financial condition or results of
operations, no assurance can be given as to the final outcome of the dispute,
the amount of any final adjustments or the potential impact of such adjustments
on the Company's financial condition or 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: utilize its facilities and
workforce profitably in the face of intense price competition; maintain or
increase market share in an industry which appears to be downsizing and
consolidating; realize benefits from cost reduction programs; generate
incremental volumes of waste to be handled through its facilities from existing
sales offices and service centers; obtain sufficient volumes of waste at prices
which produce revenue sufficient to offset the operating costs of the
facilities; minimize downtime and disruptions of operations; and develop the
industrial services, and the consulting and information services business.
(17)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FACTORS THAT MAY AFFECT FUTURE RESULTS (CONTINUED)
The Company's operations may be affected by the commencement and
completion of major site remediation projects; cleanup of major spills or other
events; 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
regulations governing the management of hazardous waste; secular changes in the
waste processing industry towards waste minimization and the propensity for
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.
Typically during the first quarter of each calendar year there is less
demand for environmental remediation due to the cold weather, particularly in
the Northeast and Midwest regions, and increased possibility of unplanned
weather related plant shutdowns.
FINANCIAL CONDITION AND LIQUIDITY
For the nine months ended September 30, 1999, the Company generated
$2,583,000 of cash from operations even though the net loss was $(1,820,000)
for the period. This result was due to sources and uses of cash that vary
from when the related revenues and expenses were recorded. The primary
sources of cash from operations were non-cash expenses that totaled $7,818,000
and consisted of depreciation and amortization of $7,047,000, additions to
the allowance for doubtful accounts of $512,000 and amortization of deferred
financing costs of $259,000. In addition, an increase in other accrued
expenses and accrued disposal costs totaling $2,613,000 which was due to
increased levels of activities and timing of interest payments on debt. These
sources of cash were primarily offset by uses of cash of $5,395,000 due to
increased levels of accounts receivable resulting from higher levels of
activities at the end of September 1999 as compared to the end of December
1998, the net loss for the period of $1,820,000, and an increase in prepaid
expenses of $740,000.
For the nine months ended September 30, 1999, the Company obtained
$2,784,000 from financing activities. Sources of cash from financing activities
were $4,139,000 due to additional borrowings under of the term promissory note,
$296,000 due to additional net borrowings under the revolving credit agreement
and $99,000 due to the issuance of additional stock under the employee stock
purchase plan. Partially offsetting these sources of cash was $1,750,000 in
payments on long-term obligations.
(18)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
The Company generated $2,583,000 of cash from operations, obtained
$2,784,000 from financing activities and $1,255,000 from the sale and
maturities of restricted investments, which was almost completely due to the
release of restricted funds that were held in a debt service reserve fund at
December 31, 1998. These funds totaling $6,622,000 were used to acquire
property, plant and equipment of $4,398,000, to acquire two divisions of
American Ecology Environmental Services Corporation for $1,900,000 and to
increase the amount of cash and cash equivalents by $324,000.
For the nine months ended September 30, 1998, the Company's operations
consumed $780,000 of cash primarily to finance higher levels of accounts
receivable of $6,342,000 due to increased sales and to cover the net loss of
$3,938,000 for the period, which were partially offset by non-cash depreciation
and amortization expenses of $6,823,000 and cash provided by an increase in
accounts payable of $2,545.000. The Company obtained $2,950,000 from financing
activities, which consisted primarily of additional net borrowings, and the
Company used $1,965,000 of cash on hand primarily to cover the cash used in
operations of $780,000, to fund the additions to property, plant and equipment
of $2,990,000 and to make payments into a debt service reserve fund of
$1,075,000.
The Company believes capital additions of approximately $5,000,000
for all of 1999 will be required to maintain existing capital assets, replace
site services equipment and upgrade information technology hardware and
software. However, the Company continues to evaluate potential acquisitions
and opening additional site services offices within and next to the Company's
service areas. Thus, it is possible that capital additions could exceed the
$5,000,000 currently planned.
As described in the Form 10-K for the year ended December 31, 1998, the
Company had a $35,000,000 Loan Agreement which consisted of a revolving credit
agreement (the "Revolver") and a term promissory note (the "Term Note"). In May
1999, the Term Note was amended. The Term Note as amended allowed the Company
to increase the amount borrowed under the Term Note by $4,139,000 from the
$1,861,000 owed prior to the amendment of the Term Note to the $6,000,000
principal amount of Term Note as amended. The Term Note as amended is payable
in monthly installments of $100,000 through May 2004. The other terms and
conditions of the Term Note remained substantially the same.
In May 1999, the due date of the Revolver was extended from May 8, 2000
to May 8, 2001 under substantially the same terms and conditions. The Revolver
allows the Company to borrow up to $24,500,000 in cash and letters of credit,
based on a formula of eligible accounts receivable. At September 30, 1999, the
Revolver balance was $10,218,000, letters of credit outstanding were $6,300,000
and funds available to borrow were approximately $7,982,000.
(19)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
The Loan Agreement has covenants that require, among others,
maintenance of a minimum level of working capital and adjusted net worth. At
September 30, 1999, the Loan Agreement required minimum amounts of working
capital and adjusted net worth of $6,000,000 and $33,000,000 respectively. At
September 30, 1999, the Company had working capital and adjusted net worth of
$15,615,000 and $35,575,000, respectively. The Company must also maintain
borrowing availability of not less than $4,500,000 for sixty consecutive days
prior to paying principal and interest on its other indebtedness and
dividends in cash on its preferred stock. In the first half of 1999, the
Company violated this covenant, which was waived by the financial institution
through May 15, 1999. Since May 15, 1999, the Company has been in compliance
with this covenant. Management believes that it will be able to comply with
this covenant for the foreseeable future, and the financial institution has
stated it will continue to waive this covenant, if violated, so long as the
Company is in substantial compliance with the covenant. However, no assurance
can be given that this covenant will not be violated and that this covenant
will be waived, if violated, in the future by the financial institution.
There were no other violations of loan covenants at September 30, 1999.
In addition, the Indenture under which the Company has outstanding
$10,000,000 of industrial revenue bonds (the "Bonds") contains certain covenants
the most restrictive of which require the Company maintain a rolling four
quarter ratio of earnings before interest, income taxes, depreciation and
amortization (EBITDA) to total debt service of 1.25 to 1. At December 31, 1997
the debt service coverage ratio was 1.04 to 1. Under the terms of the Bonds, the
deficiency in the debt coverage ratio did not and will not result in a default,
but the Company was required to pay into a debt service reserve fund held by the
Trustee for the Bonds a total amount equal to the annual debt service for one
year on the Bonds. Through March 31, 1999, the Company had paid $1,075,000 into
this fund, as required. Under the terms of the Bonds, the Company can request
that the balance of the debt service reserve fund be returned to the Company if
a debt service coverage ratio of 1.50 to 1 is met for two consecutive quarters.
For the quarters ended March 31, 1999 and December 31, 1998, the debt service
coverage ratios were 1.68 and 1.58, respectively. In May 1999, the Trustee for
the Bonds returned the balance of the debt service reserve fund to the Company.
The balance of the debt service reserve fund was reflected as a component of
restricted cash at December 31, 1998. At September 30, 1999, the debt service
coverage ratio of 1.66 to 1 was greater than the 1.25 to 1 required.
(20)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
The Company has $50,000,000 of 12 1/2% Senior Notes which mature in
May 2001. Most or all of the borrowings under the Senior Notes will need to
be refinanced by the maturity date. The ability of the Company to refinance
the Senior Notes at reasonable interest rates is dependent upon improving
results from operations and is contingent on both a favorable interest rate
environment and a market that is receptive of the type of debt that would be
issued. No assurance can be given that the Company will be successful in
improving the results from operations, that the credit markets will be
receptive to the issuance of this type of debt or that there will exist a
favorable interest rate environment.
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. The Company
currently is restricted in the payment of cash dividends due to covenants in its
loan agreements. 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. Accordingly, the Company issued 65,282 and
202,024 shares of common stock to the holders of the preferred stock in the
three and nine month periods ended September 30, 1999, respectively. The Company
anticipates that the preferred stock dividends payable through 1999 will be paid
in common stock.
YEAR 2000
As has been widely discussed in the media, companies around the
world are working on resolving the anticipated problems relating to the year
2000. The problem stems from the fact that much of the computer software,
computer hardware and control devices produced in prior years provide only
two digits with which to record the year. This may result in these products
not functioning or producing unexpected results when the year 2000 is
recorded as "00", and the program or device is unable to differentiate
whether the "00" represents the year 1900 or 2000. Since 1998, the Company
has been working on identifying and correcting the year 2000 problems.
Although the work is on-going, the Company has identified potential year 2000
issues related to its management information systems, control devices used at
its plants, and readiness of vendors and customers for the year 2000.
(21)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 (CONTINUED)
Starting in 1996, the Company began a major upgrade of all management
information systems with the ultimate aim being better control over costs and
better availability of management information, which management believes will
yield improved operating results. As a by-product of this upgrade, the Company
believes that all of its major management information systems are currently year
2000 compliant, with the exception of the human resource system. The Company
has purchased a new human resource system as part of its long-term management
information strategy at a cost of approximately $100,000 that it expects to be
able to install in 1999. Should the installation be delayed, a year 2000 upgrade
is available for the existing software. At this time, the management of the
Company believes that all major systems will be year 2000 compliant prior to the
end of 1999.
The Company compiled a list of secondary computer software and
hardware that is not year 2000 compliant. All available year 2000 patches and
fixes to secondary computer systems have been applied. Although the cost of
replacing the secondary software and hardware that is not year 2000 compliant
has not been determined, a review of the list indicates that the cost has not
and will not be material to the results of operations of the Company.
In addition to computer software and hardware, the Company utilizes a
variety of control devices in its plants, most of which are not date or time
sensitive. Based on an inventory of the control devices, the cost of replacing
the control devices that are not year 2000 compliant approximated $100,000 and
this cost has been recorded as an expense for the nine months ending September
30, 1999. The Company replaced these control devices during regularly scheduled
plant shutdowns in April of 1999.
The Company relies on a large number of primary vendors to supply
required products and services. Since the unavailability of key goods and
services could potentially disrupt the Company's operations, letters have been
sent to all primary and secondary vendors to determine their readiness for the
year 2000. To date 94% of vendors have responded to the Company's inquiry and
all critical vendors are being individually contacted. The effort to qualify all
primary vendors and certain potentially key secondary vendors as to their
readiness for the year 2000 problem is on-going. A contingency plan for backup
vendors is being established and will be implemented for those primary vendors
that fail to comply.
The Company relies on its customers to pay for services performed
within a commercially reasonable period of time. If the computer systems of
customers are not year 2000 compliant, there is a possibility that the
collection of bills, thus cash flow, could be adversely impacted in the first
quarter of 2000.
(22)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 (CONTINUED)
As discussed above, the Company is trying to insure that all mission
critical software, hardware and control devices are year 2000 compliant and that
there will be no disruption of service to its client base. In addition, the
Company is trying to insure that primary suppliers, key secondary suppliers and
significant customers are ready for the year 2000. However, due to the pervasive
use of computers and control devices throughout all businesses, there is a risk
that certain key non-compliant year 2000 software, hardware and control devices
will be overlooked by the Company, our vendors or our customers, which could
adversely affect revenues or cash flow early in the year 2000.
The Company has made significant progress on resolving problems related
to the year 2000. The Securities and Exchange Commission in Release 33-7558,
DISCLOSURE OF YEAR-2000 ISSUES AND CONSEQUENCES BY PUBLIC COMPANIES, INVESTMENT
ADVISERS, INVESTMENT COMPANIES, AND MUNICIPAL SECURITIES ISSUERS, dated August
4, 1998 requires that all companies disclose their most reasonably likely worst
case scenario relating to the year 2000. The Company has interpreted this to
mean that the assumption is that there will be no further future progress on
resolving known problems related to the year 2000. Although the Company intends
to work diligently to resolve known year 2000 problems, the Company believes
that the most reasonably likely worst case scenarios of not being able to make
any further progress on its known year 2000 problems would be a disruption in
cash flow due to the Company's customers not being able to pay their bills due
to their systems being non-compliant and a decrease in revenues due to the
inability of the Company to obtain required goods and services because of the
vendor's systems being non-compliant. The Company will continue to monitor the
situation and will continue to develop contingency plans as required.
NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE ("SOP 98-1") which provides guidance on
the accounting for the costs of software developed or obtained for internal use.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998. The
adoption of this statement in the period ended March 31, 1999 did not have a
significant effect on the Company's results of operations or its financial
position.
In 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 135 RESCISSION OF FASB STATEMENT NO. 75 AND
TECHNICAL CORRECTIONS. Statement No. 135 is effective for fiscal years ending
after February 15, 1999. It provides technical correction to 29 accounting
documents. The Company is currently studying the provisions of SFAS No. 135, and
has not adopted such provisions for the periods ended September 30, 1999.
(23)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No legal proceedings of a material nature have arisen in the third
quarter of 1999, and there have been no material changes during the third
quarter of 1999 in the pending legal proceedings disclosed in the Form 10-K for
the year ended December 31, 1998.
As disclosed in the Form 10-K for the year ended December 31, 1998 and
the Form 10-Q for the periods ended June 30, 1999, the Company was party to an
ongoing lawsuit against the City of Chicago challenging the imposition of a
waste charge by the City of Chicago on every gallon of waste received at the
Company's Chicago facility. In June 1999, the Company and the City of Chicago
reached a settlement agreement in principle where the City of Chicago agreed to
pay the Company $320,000 which represents in part a reimbursement of costs
incurred in bringing the suit.
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
EXHIBIT NO. DESCRIPTION LOCATION
- ----------- -------------------------------- ---------
27 Financial Data Schedule Filed
herewith
Reports on Form 8-K None
(24)
<PAGE>
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 12, 1999 By: /s/ Alan S. McKim
--------------------------------
Alan S. McKim
President and
Chief Executive Officer
Dated: November 12, 1999 By: /s/ Roger A. Koenecke
--------------------------------
Roger A. Koenecke
Senior Vice President and
Chief Financial Officer
(25)
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED IN FORM 10-Q AS
FILED HEREWITH, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND RELATED NOTES.
</LEGEND>
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<NAME> CLEAN HARBORS,INC.
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