<PAGE>
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
JUNE 30, 2000
-----------------------
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 02184-7535
(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 11,142,928
----------------------------- -------------------------------
(Class) (Outstanding at August 3, 2000)
===============================================================================
<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 7-12
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 13-23
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 Six Months Ended
June 30, June 30,
------------------------ --------------------
2000 1999 2000 1999
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $62,242 $51,118 $114,979 $95,766
Cost of revenues 42,795 37,380 81,904 71,249
Selling, general and administrative
expenses 10,679 8,470 20,864 17,406
Depreciation and amortization 2,674 2,273 5,179 4,639
--------- -------- -------- --------
Income from operations 6,094 2,995 7,032 2,472
Interest expense, net 2,315 2,200 4,603 4,429
--------- -------- -------- --------
Income (loss) before provision for
income taxes 3,779 795 2,429 (1,957)
Provision for income taxes 140 90 230 180
--------- -------- -------- --------
Net income (loss) $ 3,639 $ 705 $2,199 $(2,137)
========= ======== ======== ========
Basic and diluted income (loss)
per share $0.32 $0.06 $0.18 $(0.22)
========= ======== ======== ========
Weighted average common
shares outstanding 11,050 10,503 10,992 10,563
========= ======== ======== ========
Weighted average common
shares plus potentially
dilutive common shares 11,107 10,515 11,138 10,563
========= ======== ======== ========
</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, except share amounts)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(Unaudited)
---------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $3,096 $2,783
Restricted investments 1,658 1,116
Accounts receivable, net of allowance for doubtful
accounts of $1,293 and $1,157, respectively 51,202 43,780
Prepaid expenses 1,694 1,094
Supplies inventories 2,873 2,808
Income tax receivable 122 122
---------- ----------
Total current assets 60,645 51,703
---------- ----------
Property, plant and equipment:
Land 8,478 8,478
Buildings and improvements 41,549 40,612
Vehicles and equipment 88,714 84,528
Furniture and fixtures 2,225 2,219
Construction in progress 1,270 1,224
---------- ----------
142,236 137,061
Less - Accumulated depreciation
and amortization 85,074 80,849
---------- ----------
Net property, plant and equipment 57,162 56,212
---------- ----------
Other assets:
Goodwill, net 20,183 20,566
Permits, net 12,104 12,633
Other 4,137 4,133
---------- ----------
Total other assets 36,424 37,332
---------- ----------
Total assets $154,231 $145,247
========== ==========
</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, except share amounts)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(Unaudited)
---------------- ------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations $52,300 $1,300
Accounts payable 18,759 17,830
Accrued disposal costs 9,164 6,591
Other accrued expenses 12,414 11,360
Income taxes payable 180 57
---------- ----------
Total current liabilities 92,817 37,138
---------- ----------
Long-term obligations, less current maturities 23,561 72,683
Other 1,303 1,255
---------- ----------
Total other liabilities 24,864 73,938
---------- ----------
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 $5.6 million) 1 1
Common Stock, $.01 par value
Authorized-20,000,000 shares;
Issued and outstanding-11,055,254 and
10,798,007 shares, respectively 111 108
Additional paid-in capital 61,656 61,245
Accumulated other comprehensive loss (46) (36)
Accumulated deficit (25,172) (27,147)
---------- ----------
Total stockholders' equity 36,550 34,171
---------- ----------
Total liabilities and stockholders' equity $154,231 $145,247
========== ==========
</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>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
2000 1999
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $2,199 $(2,137)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 5,179 4,639
Allowance for doubtful accounts 342 342
Amortization of deferred financing costs 172 172
Loss on sale of fixed assets 6 --
Changes in assets and liabilities:
Accounts receivable (7,764) (363)
Prepaid expenses (600) (271)
Supplies inventories (65) 62
Other assets (4) 339
Accounts payable 233 (1,863)
Accrued disposal costs 2,573 19
Other accrued expenses 1,054 146
Income tax payable 123 18
Other liabilities 48 73
-------- --------
Net cash provided by operating activities 3,496 1,176
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (4,570) (2,728)
Acquisition -- (1,900)
Proceeds from sale and maturities of
restricted investments -- 1,204
Proceeds from the sale of fixed assets 43 --
Cost of restricted investments acquired (552) (14)
-------- --------
Net cash used in investing activities $(5,079) $(3,438)
-------- --------
</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
UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings under term notes $3,000 $4,139
Net borrowings (repayments) under long-term
revolver (527) 1,010
Payments on long-term obligations (767) (1,350)
Proceeds from exercise of stock options 69 --
Proceeds from employee stock purchase plan 121 68
-------- --------
Net cash provided by financing activities 1,896 3,867
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 313 1,605
Cash and cash equivalents, beginning of year 2,783 1,895
-------- --------
Cash and cash equivalents, end of period $3,096 $ 3,500
======== ========
Supplemental Information:
Non cash investing and financing activities:
Stock dividend on preferred stock $ 224 $ 224
</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 Accumulated
------------- ------------- Other
Number $0.01 Number $0.01 Additional Comprehensive Comprehensive Total
of Par of Par Paid-in Income Income Accumulated Stockholders'
Shares Value Shares Value Capital (Loss) (Loss) Deficit Equity
------ ----- ------ ----- ---------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 112 $1 10,798 $108 $61,245 -- $(36) $(27,147) $34,171
Net income -- -- -- -- -- $2,199 -- 2,199 2,199
Other comprehensive income, net
of tax:
Unrealized holding losses
arising during the period -- -- -- -- -- (10) -- -- --
-------------
Other comprehensive loss -- -- -- -- -- (10) (10) -- (10)
-------------
Comprehensive income -- -- -- -- -- $2,189 -- -- --
Preferred stock dividends: =============
Series B -- -- 132 1 223 -- -- (224) --
Proceeds from exercise of stock
options -- -- 60 1 68 -- -- -- 69
Employee stock purchase plan -- -- 65 1 120 -- -- -- 121
------ ----- ------ ----- ---------- ------------- ------------- ----------- -------------
Balance at June 30, 2000 112 $1 11,055 $111 $61,656 -- $(46) $(25,172) $36,550
====== ===== ====== ===== ========== ============= ============= =========== =============
</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 of a normal recurring nature necessary for the fair statement of
results of interim periods. The operating results for the three and six months
ended June 30, 2000 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, 1999 as filed with the Securities and Exchange
Commission.
NOTE 2 RECLASSIFICATIONS
Certain reclassifications have been made in the prior period's
consolidated financial statements to conform to the 2000 presentation.
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 and Houston, 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 effect revenues or results from operations
for the three and six months ended June 30, 2000 or 1999.
Assuming this acquisition had occurred January 1, 1999, 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 six
months ended June 30, 1999. Such unaudited pro forma amounts are not indicative
of what the actual consolidated results of operation might have been if the
acquisition had been effective at the beginning of 1999.
(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, 1999,
the Company had a $30,500,000 Loan Agreement with a financial institution. The
Loan Agreement provided for a $24,500,000 revolving credit portion (the
"Revolver") and a $6,000,000 term promissory note (the "Term Note"). The
Revolver allowed the Company to borrow up to $30,500,000 in cash and letters of
credit, based on a formula of eligible accounts receivable. At June 30, 2000,
the Revolver balance was $9,069,000, letters of credit outstanding were
$6,525,000 and funds available to borrow were approximately $8,906,000.
In the first quarter of 2000, the Loan Agreement was amended and an
additional term promissory note (the "2000 Term Note") was entered into with the
financial institution. The original principal amount of the 2000 Term Note is
$3,000,000, it bears interest at the "prime" rate plus 1.5% or the Eurodollar
rate plus 3.0%, and it is payable in 36 monthly installments commencing on May
1, 2000. The funds have been used primarily to purchase vehicles and rolling
stock that the Company previously leased under operating leases. At June 30,
2000, the balance of the Term Note and the 2000 Term Note were $4,700,000 and
$2,833,000, respectively.
In the first quarter of 2000, the due date of the Revolver was extended
from May 8, 2001 to May 8, 2003. The Company has $50,000,000 of 12 1/2% Senior
Notes due May 15, 2001 (the "Senior Notes"). In May 2000, the Senior Notes were
reclassified from a long-term liability to a current liability, since they are
now payable within one year. The Loan Agreement, as amended, redefines the
working capital covenant to specifically exclude the Senior Notes as a component
of working capital and requires that the Company maintain $6,000,000 of working
capital, excluding the Senior Notes. The net worth covenant was changed to
require $30,000,000 of adjusted net worth. At June 30, 2000 the Company had
working capital (excluding the Senior Notes) and adjusted net worth of
$17,828,000 and $36,550,000, 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 quarter of 2000, the Company
violated this covenant, which has been waived by the financial institution
through May 15, 2000. Since May 15, 2000, the Company has been in compliance
with this covenant.
Effective June 1, 2000, the Bond Documents under which the Company has
outstanding $9,900,000 of industrial revenue bonds (the "Bonds") were amended in
order to modify the limitation on additional debt covenant and certain related
debt service reserve fund requirements. Under the amended Bond Documents, the
Company may now issue Bank Debt up to $35,000,000 provided that after the
issuance, the ratio of the Company's total debt to total capital (debt plus
(8)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 FINANCING ARRANGEMENTS (CONTINUED)
stockholders' equity) does not exceed 72% (which ratio will be reduced to 70%
on January 1, 2006 and 65% on January 1, 2011). As of June 30, 2000, Bank
Debt totaled $16,602,000 and the debt to total capital ratio was 67.7%.
Although the debt to total capital ratio was less than 72%, the amended Bond
Documents require that the Company make payments into a debt service reserve
fund held by the Trustee that total $750,000 in six equal monthly
installments of $125,000 each if either of the following occurs (i) the
Company's ratio of earnings before interest, taxes, depreciation and
amortization ("EBITDA") to total interest (the "EBITDA coverage ratio") for
the most recently completed fiscal year is less than 1.5 to 1.0, or (ii) the
Company's ratio of debt to total capital at the end of such fiscal year is
greater than 65%. Because the Company did not satisfy both of these ratios as
of December 31, 1999, the amended Bond Documents require that the Company
make six monthly payments of $125,000 each into the debt service reserve fund
commencing on June 1, 2000. In addition to the maximum of $750,000 required
to be deposited into the debt service reserve fund based upon the level of
the Company's additional debt, the Company could be required to make
additional payments to bring the total of the debt service reserve fund to a
maximum of approximately $1,200,000 (including the $750,000 described above)
if the EBITDA coverage ratio for any fiscal year is less than 1.25 to 1.0.
The EBITDA coverage ratio for the year ended December 31, 1999 was 1.39, and
the Company has therefore not been required to make any such additional
payments into the debt service reserve fund based upon the Company's EBITDA
coverage ratio. The maximum amount of the debt service reserve fund of
approximately $1,200,000 is the same as under the Bond Documents prior to the
amendment, but the amendment modified the terms under which the Company may
be required to make payments into the fund as described above. To the extent
that the Company is required to make payments into the debt service reserve
fund and the Company thereafter satisfies certain requirements based upon the
additional debt and EBITDA coverage ratios described above, the balance then
in the debt service reserve fund will be released for the Company's general
use.
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 1998, based upon this
review, the valuation allowance was increased to cover the value of all net
deferred tax assets. Accordingly, no tax benefit was recorded relating to the
net loss for the six months ended June 30, 1999. For the three months ended June
30, 1999 and the three and six months ended June 30, 2000, the Company incurred
no regular income tax expense due to the existence of net operating loss
carryforwards. Income tax expense for the three and six months ended June 30,
1999 consists of tangible property and net worth taxes that are levied as a
component of state income taxes. Income tax expense for the three and six months
ended June 30, 2000 consists of tangible property and net worth taxes that are
levied as a component of state income taxes, and federal alternative minimum
taxes.
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.
(9)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 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.
NOTE 6 EARNINGS (LOSS) PER SHARE
The following is a reconciliation of basic and diluted income (loss)
per share computations (in thousands except for per share amounts):
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Income
--------------- ---------------- -----------
<S> <C> <C> <C>
Net income $3,639
Less preferred dividends 112
------------ ----------- ---------
Basic EPS
(income available to shareholders) 3,527 11,050 0.32
Effect of dilutive securities -- 57 --
------------ ----------- ---------
Diluted EPS
Income available to common share-
holders plus assumed conversions $3,527 11,107 $0.32
============ =========== =========
</TABLE>
(10)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 EARNINGS (LOSS) PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Income
--------------- --------------- -----------
<S> <C> <C> <C>
Net income $ 705
Less preferred dividends 112
-------------- --------- -------
Basic EPS
(income available to shareholders) 593 10,503 0.06
Effect of dilutive securities -- 12 --
-------------- --------- -------
Diluted EPS
Income available to common
shareholders plus assumed
conversions $ 593 10,515 $0.06
============== ========= =======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Income
--------------- ---------------- -----------
<S> <C> <C> <C>
Net income $ 2,199
Less preferred dividends 224
-------------- --------- -------
Basic EPS
(income available to shareholders) 1,975 10,992 0.18
Effect of dilutive securities -- 146 --
-------------- --------- -------
Diluted EPS
Income available to common share-
holders plus assumed conversions $1,975 11,138 $0.18
============== ========= =======
</TABLE>
(11)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 EARNINGS (LOSS) PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
----------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Loss
--------------- ---------------- -----------
<S> <C> <C> <C>
Net loss $(2,137)
Less preferred dividends 224
-------------- --------- -------
Basic and diluted EPS
(loss available to stockholders) $(2,361) 10,563 $(0.22)
============== ========= =======
</TABLE>
The Company has issued options, warrants and convertible preferred
stock which are potentially dilutive to earnings. For the three and six months
ended June 30, 2000 and the three months ended June 30, 1999, some of the
options outstanding but none of the warrants or convertible preferred stock are
dilutive. 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 six months ended June 30, 1999, the options,
warrants and convertible stock outstanding have not been included in the above
calculation, since their inclusion would have been antidilutive for the period.
(12)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENT
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 Six Months Ended
June 30, June 30,
-------------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues:
Disposal costs paid to third parties 11.4 13.9 11.9 13.2
Other costs 57.3 59.2 59.3 61.2
-------- -------- -------- -------
Total cost of revenues 68.7 73.1 71.2 74.4
Selling, general and administrative
expenses 17.2 16.6 18.2 18.2
Depreciation and amortization
of intangible assets 4.3 4.4 4.5 4.8
-------- -------- -------- -------
Income from operations 9.8% 5.9% 6.1% 2.6%
======== ======== ======== =======
</TABLE>
(13)
<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 Six Months Ended
June 30, June 30,
------------------------ ---------------------
2000 1999 2000 1999
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Other Data:
----------
Earnings before interest, taxes,
depreciation and amortization
(EBITDA) (in thousands) $8,768 $5,268 $12,211 $7,111
</TABLE>
REVENUES
Revenues for the second quarter of 2000 were $62,242,000, up
$11,124,000 or 21.8% compared to revenues of $51,118,000 for the second
quarter of the prior year. Of the total revenue increase for the quarter,
approximately 60% came from site services, which includes higher margin
emergency response events, and 40% from transportation and disposal services.
The volume of waste processed through the Company's facilities increased
20.8%. This increase was partially offset by a 1.6% price decrease.
Revenues for the first half of 2000 were $114,979,000, up $19,213,000
or 20.1% compared to revenues of $95,766,000 for the first half of the prior
year. Of the total first half revenue increase, approximately 50% came from
site services and 50% from transportation and disposal services. The volume
of waste processed through the Company's facilities increased 16.4%. This
increase was partially offset by a 1.9% price decrease.
(14)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES (CONTINUED)
In June 2000, a major competitor of the Company, Safety-Kleen Corp.,
announced that it had filed for chapter 11 bankruptcy protection. The Company
does not believe that revenues for the three and six month periods ending June
30, 2000 were significantly impacted by Safety-Kleen's announcement.
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 $42,795,000 for the quarter ended June 30,
2000 compared to $37,380,000 for the quarter ended June 30, 1999, an increase
of $5,415,000. As a percentage of revenues, cost of revenues decreased from
73.1% for the quarter ended June 30, 1999 to 68.7% for the quarter ended June
30, 2000. 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 13.9% for the quarter ended
June 30, 1999 to 11.4% for the quarter ended June 30, 2000. This decrease was
due to disposal revenues decreasing as a percentage of total revenues due to
the revenue mix, and to continuing efforts to internalize the disposal of
waste, to develop alternative lower cost disposal technologies and to
identify lower cost suppliers. Other costs of revenues as a percentage of
revenues declined from 59.2% for the quarter ended June 30, 1999 to 57.3% for
the quarter ended June 30, 2000. This decrease was primarily due to increased
margins on waste processed through the Company's facilities due to the
increase in the volume of waste processed and the fixed cost nature of the
facilities.
Cost of revenues were $81,904,000 for the first half of 2000
compared to $71,249,000 for the first half of 1999, an increase of
$10,655,000. As a percentage of revenues, cost of revenues decreased from
74.4% for the six months ended June 30, 1999 to 71.2% for the six months
ended June 30, 2000. 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 13.2% for the first
half of 1999 to 11.9% for the first half of 2000. This decrease was due to
disposal revenues decreasing as a percentage of total revenues due to the
revenue mix, and to continuing efforts to internalize the disposal of waste,
to develop alternative lower cost disposal technologies and to identify lower
cost suppliers. Other costs of revenues as a percentage of revenues declined
from 61.2% for the first half of 1999 to 59.3% for the first half of 2000.
This decrease was primarily due to increased margins on waste processed
through the Company's facilities due to the increase in the volume of waste
processed and the fixed cost nature of the facilities.
(15)
<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. The Company
continues to upgrade the quality and efficiency of its waste treatment services
through the development of new technology and continued modifications and
upgrades at its facilities. In addition during the first quarter 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.
Efforts to reduce costs are ongoing.
SELLING, GENERAL AND ADMISISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $10,679,000
for the quarter ended June 30, 2000 from $8,470,000 for the quarter ended June
30, 1999, an increase of $2,209,000 or 26.1%. The Company has in place
management incentive and commission plans. The increase in amounts earned under
these plans due to the improved results of operations and increased sales caused
a majority of the increase in selling, general and administrative expenses.
Professional fees increased due to the cost of ongoing legal matters. In
addition, the prior year included a $320,000 reduction due to a favorable legal
settlement. Also, the strategic initiatives related to e-commerce and Harbor
Industrial Services resulted in increases in selling, general and administrative
expenses.
Selling, general and administrative expenses increased to $20,864,000
for the first half of 2000 from $17,406,000 for the first half of 1999, an
increase of $3,458,000 or 19.9%. The increase in amounts earned under management
incentive and commission plans due to the improved results of operations and
increased sales caused a majority of the increase in selling, general and
administrative expenses. Professional fees increased due to the cost of ongoing
legal matters. In addition, the prior year included a $320,000 reduction due to
a favorable legal settlement. Also, the strategic initiatives related to
e-commerce and Harbor Industrial Services resulted in increases in selling,
general and administrative expenses.
(16)
<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 $2,315,000 for the second
quarter of 2000 as compared to $2,200,000 for the second quarter of 1999. The
increase in interest expense is primarily due to higher variable interest rates
on the revolving credit facility and term note, and higher average balances of
debt outstanding.
Interest expense net of interest income was $4,603,000 for the first
half of 2000 as compared to $4,429,000 for the first half of 1999. The increase
in interest expense is primarily due to higher variable interest rates on the
revolving credit facility and term note, and higher average balances of debt
outstanding.
INCOME TAXES
For the quarter ended June 30, 2000, income tax expense of $140,000
was recorded on a pre-tax income of $3,779,000 for an effective tax rate of
3.7%, as compared to tax expense of $90,000 that was recorded on a pre-tax
income of $795,000 for the same quarter of the previous year for an effective
tax rate of 11.3%. For the half year ended June 30, 2000, income tax expense of
$230,000 was recorded on a pre-tax income of $2,429,000 for an effective tax
rate of 9.5%, as compared to tax expense of $180,000 that was recorded on a
pre-tax loss of $(1,957,000) for the same period of the previous year for an
effective tax rate of (9.2)%. 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 1998,
based upon this review, the valuation allowance was increased to cover the value
of all net deferred tax assets. Accordingly, no tax benefit was recorded
relating to the net loss for the six months ended June 30, 1999. For the three
months ended June 30, 1999 and the three and six months ended June 30, 2000, the
Company incurred no regular income tax expense due to the existence of net
operating loss carryforwards. Income tax expense for the three and six months
ended June 30, 1999 consists of tangible property and net worth taxes that are
levied as a component of state income taxes. Income tax expense for the three
and six months ended June 30, 2000 consists of tangible property and net worth
taxes that are levied as a component of state income taxes and federal
alternative minimum taxes.
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.
(17)
<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
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 business.
The future operating results of the Company's 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.
(18)
<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 six months ended June 30, 2000, the Company generated
$3,496,000 of cash from operations. Sources of operating cash totaled
$11,929,000 and consisted primarily of $2,199,000 of net income for the period,
non-cash expenses of $5,179,000 for depreciation and amortization, $342,000 for
the allowance for doubtful accounts and $172,000 for the amortization of
deferred financing costs. Additional sources of cash were increases in accrued
disposal costs of $2,573,000 and other accrued expenses of $1,054,000. These
increases in liabilities were due primarily to the greater amount of business
performed in the second quarter of 2000 as compared to the fourth quarter of
1999. Partially offsetting these sources of cash were uses of cash of $8,433,000
which were primarily due to higher levels of accounts receivable at June 30,
2000 as compared to December 31, 1999 which was in turn due to the higher levels
of business in the second quarter of 2000 as compared to the fourth quarter of
1999.
In addition, the Company obtained $1,896,000 of cash from financing
activities which consisted of additional borrowings under the term note of
$3,000,000 and which was partially offset by repayments under the revolving line
of credit of $527,000 and repayments under the term notes of $767,000.
Additional sources of cash from financing activities consisted of proceeds from
the exercise of stock options of $69,000 and proceeds from issuances of stock
under the employee stock purchase plan of $121,000.
The $3,496,000 of cash generated from operations plus the $1,896,000
provided by financing activities together with $43,000 in proceeds from the sale
of fixed assets was used to purchase property, plant and equipment of
$4,570,000, to purchase $552,000 of restricted investments and to increase the
amount of cash on hand by $313,000.
(19)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
For the six months ended June 30, 1999, the Company generated
$1,176,000 of cash from operations even though it lost $(2,137,000) for the
period primarily due to non-cash expenses that total $5,153,000 and consist of
depreciation and amortization of $4,639,000, additions to the allowance for
doubtful accounts of $342,000 and amortization of deferred financing costs of
$172,000. Partially offsetting these sources of cash are the primary uses of
cash of $2,137,000 due to the net loss for the period and a $1,863,000 decrease
in accounts payable at June 30, 1999 as compared to December 31, 1998.
For the six months ended June 30, 1999, the Company obtained $3,867,000
from financing activities. Sources of cash from financing activities were
$4,139,000 due to additional borrowings under of the term promissory note,
$1,010,000 due to additional net borrowings under the revolving credit agreement
and $68,000 due to the issuance of additional stock under the employee stock
purchase plan. Partially offsetting these sources of cash was $1,350,000 in
payments on long-term obligations.
The Company generated $1,176,000 of cash from operations and $3,867,000
from financing activities together with $1,204,000 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 $6,247,000 were used primarily to acquire property,
plant and equipment of $2,728,000, 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 $1,605,000.
As described in the Form 10-K for the year ended December 31,
1999, the Company had a $30,500,000 Loan Agreement with a financial institution.
The Loan Agreement provided for a $24,500,00 revolving credit portion (the
"Revolver") and a $6,000,000 term promissory note (the "Term Note"). The
Revolver allowed the Company to borrow up to $30,500,000 in cash and letters of
credit, based on a formula of eligible accounts receivable. At June 30, 2000,
the Revolver balance was $9,069,000, letters of credit outstanding were
$6,525,000 and funds available to borrow were approximately $8,906,000.
In the first quarter of 2000, the Loan Agreement was amended and an
additional term promissory note (the "2000 Term Note") was entered into with the
financial institution. The original principal amount of the 2000 Term Note is
$3,000,000, it bears interest at the "prime" rate plus 1.5% or the Eurodollar
rate plus 3.0%, and it is payable in 36 monthly installments commencing on May
1, 2000. The funds have been used primarily to purchase vehicles and rolling
stock that the Company previously leased under operating leases. The purchase of
the vehicles will result in lower lease expense in cost of revenues and higher
levels of expense for depreciation and interest. At June 30, 2000, the balance
of the Term Note and the 2000 Term Note were $4,700,000 and $2,833,000,
respectively.
(20)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
In the first quarter of 2000, the due date of the Revolver was extended
from May 8, 2001 to May 8, 2003. The Company has $50,000,000 of 12 1/2% Senior
Notes due May 15, 2001 (the "Senior Notes"). In May 2000, the Senior Notes were
reclassified from a long-term liability to a current liability, since they are
now payable within one year. The Loan Agreement, as amended, redefines the
working capital covenant to specifically exclude the Senior Notes as a component
of working capital and requires that the Company maintain $6,000,000 of working
capital, excluding the Senior Notes. The net worth covenant was changed to
require $30,000,000 of adjusted net worth. At June 30, 2000 the Company had
working capital (excluding the Senior Notes) and adjusted net worth of
$17,828,000 and $36,550,000, 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 quarter of 2000, the Company
violated this covenant, which was waived by the financial institution through
May 15, 2000. The financial institution has stated that it will continue to
waive this covenant, if violated; however, no assurance can be given that this
covenant will be waived, if violated, in the future by the financial
institution. The Company has been in compliance with this covenant since May 15,
2000, and the Company believes that it will meet this covenant for the
foreseeable future.
Effective June 1, 2000, the Bond Documents under which the Company
has outstanding $9,900,000 of industrial revenue bonds (the "Bonds") were
amended in order to modify the limitation on additional debt covenant and
certain related debt service reserve fund requirements. Under the amended
Bond Documents, the Company may now issue Bank Debt up to $35,000,000
provided that after the issuance, the ratio of the Company's total debt to
total capital (debt plus stockholders' equity) does not exceed 72% (which
ratio will be reduced to 70% on January 1, 2006 and 65% on January 1, 2011).
As of June 30, 2000, Bank Debt totaled $16,602,000 and the debt to total
capital ratio was 67.7%. Although the debt to total capital ratio was less
than 72%, the amended Bond Documents require that the Company make payments
into a debt service reserve fund held by the Trustee that total $750,000 in
six equal monthly installments of $125,000 each if either of the following
occurs (i) the Company's ratio of earnings before interest, taxes,
depreciation and amortization ("EBITDA") to total interest (the "EBITDA
coverage ratio") for the most recently completed fiscal year is less than 1.5
to 1.0, or (ii) the Company's ratio of debt to total capital at the end of
such fiscal year is greater than 65%. Because the Company did not satisfy
both of these ratios as of December 31, 1999, the amended Bond Documents
require that the Company make six monthly payments of $125,000 each into the
debt service reserve fund commencing on June 1, 2000. In addition to the
maximum of $750,000 required to be deposited into the debt service reserve
fund based upon the level of the Company's additional debt, the Company could
be required to make additional payments to bring the total of the debt
service reserve fund to a maximum of approximately $1,200,000 (including the
$750,000 described above) if the EBITDA coverage ratio for any fiscal year is
less than 1.25 to 1.0. The EBITDA coverage ratio for the year ended December
31, 1999 was 1.39, and the Company has therefore not been required to make
any such additional payments into the debt service reserve fund based upon
the Company's EBITDA coverage ratio. The maximum amount of the debt service
reserve fund of approximately $1,200,000 under the amended Bond Documents is
the same as under the Bond Documents prior to the amendment, but the
amendment modified the terms under which the Company may be required to make
payments into the fund as described above. To the extent that the Company is
required to make payments into the debt service reserve fund and the Company
thereafter satisfies certain requirements based upon the additional debt and
EBITDA coverage ratios described above, the balance then in the debt service
reserve fund will be released for the Company's general use. The Company
believes that it will be able to maintain for the foreseeable future an
EBITDA coverage ratio of at least 1.5 to 1.0 and debt to total capital ratio
of less than 72%, and that the Company's sole obligation under the amended
loan documents for the foreseeable future will therefore be to maintain
$750,000 in the reserve fund until the ratio of the Company's total debt to
total capital does not exceed 65% as of the end a future fiscal year.
(21)
<PAGE>
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
Management believes that sufficient resources will be available to
meet the Company's cash requirements through at least May 2001. In May 2001
the $50,000,000 of Senior Notes mature. Some portion or all of the borrowings
under the Senior Notes will need to be refinanced by the maturity date, with
any portion not refinanced to be repaid from other sources such as cash from
operations or net proceeds from the sale of assets or additional equity. The
Company believes that results from operations have improved to the point
where the Senior Notes can be refinanced at terms satisfactory to the
Company. However, no assurance can be given that the Company will be
successful in refinancing the Senior Notes on satisfactory terms. Failure to
obtain refinancing would materially adversely affect the Company.
Operators of hazardous waste handling facilities are required by
federal and state regulations to provide financial assurance for closure and
post-closure care of those facilities, should the facilities cease operation.
Closure would include the cost of removing the waste stored at a facility
which ceased operating and sending the material to another company for
disposal. The Company had purchased closure insurance from Frontier Insurance
Company, as had a number of other companies that operate hazardous waste
facilities. In June 2000 due to deteriorating financial condition, Frontier
Insurance Company was dropped from the listing of approved sureties. This
required any company that had obtained financial assurance through Frontier
Insurance Company to obtain financial assurance through some other source. In
July 2000, the Company obtained the required closure insurance through a
qualified insurance company. Obtaining this insurance required the Company to
place $4,000,000 of additional collateral in the form of letters of credit.
This increase in letters of credit will be partially offset by the release of
other collateral currently in place, which will reduce the amount available
to borrow by $1,100,000 under the revolving line of credit from what
otherwise would have been available. The Company believes that it will
continue to have sufficient resources to meet the Company's cash requirements
subsequent to the issuance of the additional letters of credit. In addition,
the Company believes that some other companies in the hazardous waste
industry may not be able to obtain financial assurance through some other
source and that under the regulations those companies should be required to
cease operations. However, the Company cannot predict with certainty whether
or not other companies will be able to obtain financial assurance, whether
and for how long regulators may allow other companies to operate without
financial assurance, or the effect on the marketplace if certain hazardous
waste facilities are required to cease operations.
(22)
<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 expects 2000 capital additions, excluding the $2,500,000
purchase of vehicles and rolling stock discussed previously, to be approximately
$4,000,000. The Company believes that it has all of the facilities required by
the business for the foreseeable future. Thus, the Company anticipates that
capital expenditures in 2000 will be limited to maintaining existing capital
assets, replacing site services equipment, and upgrading 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 $6,500,000 currently planned.
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 January and April 2000 dividends in common stock.
Accordingly, the Company issued 92,849 and 39,169 shares of common stock to the
holders of the preferred stock in the quarters ended March 31 and June 30, 2000,
respectively. The Company anticipates being able to resume cash payment of
preferred stock dividends starting with the October 15, 2000 dividend.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation (an interpretation of ABP Opinion No. 25)" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and, among other issues,
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
non-compensatory plan; the accounting consequences of various modifications to
the terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000 but certain conclusions in FIN 44 cover specific events
that occurred after either December 15, 1998 or January 12, 2000. The Company
does not expect the application of FIN 44 to have a material impact on the
Company's results of operations or its financial position.
(23)
1
<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 first half
of 2000, and there have been no material changes during the first half of 2000
in the pending legal proceedings disclosed in the Form 10-K for the year ended
December 31, 1999.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 2000 Annual Meeting of Stockholders was held on June 16,
2000. At the meeting, the Stockholders elected John T. Preston and Lorne R.
Waxlax to serve as directors of the Company for a three-year term, until the
2003 Annual Meeting of Stockholders. Other directors whose term of office as
director continued after the meeting were: Christy W. Bell, John F. Kaslow,
Daniel J. McCarthy, Alan S. McKim and Thomas J. Shields.
Stockholders owning 10,044,926 shares of stock, or 90.9% of eligible
shares were represented in person or by proxy. Of the total shares
represented at the meeting, the holders of 6,577,495 shares voted to approve
the 2000 Stock Incentive Plan, which authorized the Company's Board of Directors
to issue awards of up to 800,000 shares of common stock in the form of (i)
incentive stock options, (ii) non-qualified stock options or (iii) issuances of
restricted stock. The holders of 298,069 shares voted against approval of the
plan and holders of 17,717 shares abstained.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Exhibit No. Description Location
----------- -------------------------- --------
<S> <C> <C>
27 Financial Data Schedule Filed
herewith
Reports on Form 8-K None
</TABLE>
(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: August 10, 2000 By: /s/ Alan S. McKim
---------------------------------
Alan S. McKim
Chairman of the Board and
Chief Executive Officer
Dated: August 10, 2000 By: /s/ Roger A. Koenecke
---------------------------------
Roger A. Koenecke
Senior Vice President and
Chief Financial Officer
(25)
