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MarketScreener Homepage  >  Equities  >  Nyse  >  Clean Harbors, Inc.    CLH

CLEAN HARBORS, INC.

(CLH)
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CLEAN HARBORS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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10/30/2019 | 10:43am EDT
Forward-Looking Statements
In addition to historical information, this Quarterly Report on Form 10-Q
contains forward-looking statements, which are generally identifiable by use of
the words "believes," "expects," "intends," "anticipates," "plans to,"
"estimates," "projects," "may," "likely" 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 under Item 1A, "Risk Factors," in our
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
February 27, 2019, under Item 1A, "Risk Factors," included in Part II-Other
Information in this report, and in other documents we file from time to time
with the SEC. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's opinions only as of the
date hereof. We undertake no obligation to revise or publicly release the
results of any revision to these forward-looking statements.
Overview
We are North America's leading provider of environmental, energy and industrial
services. We believe we operate, in the aggregate, the largest number of
hazardous waste incinerators, landfills and treatment, storage and disposal
facilities ("TSDFs") in North America. We serve a diverse customer base,
including Fortune 500 companies, across the chemical, energy, manufacturing and
additional markets, as well as numerous government agencies. These customers
rely on us to deliver a broad range of services including but not limited to
end-to-end hazardous waste management, emergency response, industrial cleaning
and maintenance and recycling services. We are also the largest re-refiner and
recycler of used oil in the world and the largest provider of parts cleaning and
related environmental services to commercial, industrial and automotive
customers in North America.
Performance of our segments is evaluated on several factors of which the primary
financial measure is Adjusted EBITDA as described more fully below. The
following is a discussion of how management evaluates its segments in regards to
other factors including key performance indicators that management uses to
assess the segments' results, as well as certain macroeconomic trends and
influences that impact each reportable segment:
•         Environmental Services - Environmental Services segment results are

predicated upon the demand by our customers for waste services directly

attributable to volume and nature of waste streams generated by them

and project work for which waste handling and/or disposal is required.

          In managing the business and evaluating performance, management tracks
          the volumes and average price of waste handled and disposed of through
          our owned incinerators and landfills, as well as utilization of such
          incinerators, labor and billable hours and equipment among other key
          metrics. Levels of activity and ultimate performance associated with
          this segment can be impacted by several factors including overall U.S.

GDP and U.S. industrial production, weather conditions, efficiency of

          our operations, competition and market pricing of our services and the
          management of our related operating costs. Environmental Services
          results are also impacted by the demand for planned and unplanned
          industrial related cleaning and maintenance services at customer sites

and for environmental cleanup services on a scheduled or emergency

basis, including response to national events such as major oil spills,

          natural disasters or other events where immediate and specialized
          services are required.

• Safety-Kleen - Safety-Kleen segment results are impacted by an array of

          core service offerings that serve to attract small quantity waste
          producers as customers and integrate them into the Clean Harbors waste
          network. Core service offerings include parts washer services,
          containerized waste services, vacuum services, used motor oil
          collection and sale of base and blended oil products as well as
          complementary products including automotive related fluids and shop

supplies. Key performance indicators tracked by management relative to

these services include the number of parts washer services performed

          and used motor oil and waste volumes collected. Results from these
          services are primarily driven by the overall number of parts washers
          placed at customer sites and volumes of waste collected. These factors

can be impacted by overall economic conditions in the marketplace,

          especially in the automotive related area. Safety-Kleen offers high
          quality base and blended oil products to end users including fleet

customers, distributors and manufacturers of oil products. Relative to

these oil related products, management tracks the Company's volumes and

          relative percentages of base and blended oil sales along with various
          pricing metrics associated with the commodity driven marketplace. The
          segment's results are significantly impacted by the overall market
          pricing and product mix associated with base and blended oil products
          and, more specifically, the market prices of Group II base oils, which
          historically have correlated with overall crude oil prices. Costs
          incurred in connection with the collection of used oils and other raw
          materials associated with the segment's oil related products can also

be volatile. The implementation of our OilPlus® closed loop initiative

          resulting in the sale of our renewable oil products directly to our end
          customers will also impact future operating results.



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Highlights

Total revenues for the three and nine months ended September 30, 2019 were
$891.7 million and $2,541.2 million compared with $843.2 million and $2,442.1
million for the three and nine months ended September 30, 2018. In the three and
nine months ended September 30, 2019, our Environmental Services segment
increased direct revenues 8.1% and 5.7% from the comparable periods in 2018
primarily due to continued improvements in average pricing driven by a more
profitable mix of waste streams primarily from chemical and manufacturing
customers. In the three and nine months ended September 30, 2019, our
Safety-Kleen segment increased direct revenues 1.7% and 1.3% from the comparable
periods in 2018 as a result of continued growth across Safety-Kleen's core
service offerings and our blended oil sales. The fluctuation of the Canadian
dollar negatively impacted our consolidated revenues by $1.5 million and $13.1
million in the three and nine months ended September 30, 2019.
We reported income from operations for the three and nine months ended
September 30, 2019 of $80.4 million and $177.1 million compared with $65.7
million and $141.1 million in the three and nine months ended September 30,
2018. We reported net income for the three and nine months ended September 30,
2019 of $36.4 million and $73.6 million compared with net income of $31.1
million and $49.2 million in the three and nine months ended September 30, 2018.
Adjusted EBITDA, which is the primary financial measure by which our segments
are evaluated, increased 10.9% to $156.6 million in the three months ended
September 30, 2019 from $141.3 million in the three months ended September 30,
2018 and increased 10.6% to $408.1 million in the nine months ended
September 30, 2019 from $369.1 million in the nine months ended September 30,
2018. Additional information, including a reconciliation of Adjusted EBITDA to
net income, appears below under the heading "Adjusted EBITDA."
Net cash from operating activities for the nine months ended September 30, 2019
was $284.7 million, an increase of $37.5 million from the comparable period in
2018. Adjusted free cash flow, which management uses to measure our financial
strength and ability to generate cash, was $119.1 million in the nine months
ended September 30, 2019, compared to $102.6 million in the comparable period of
2018. The increase in adjusted free cash flow in the first nine months of 2019
as compared to the first nine months of 2018 was most directly attributable to
greater levels of operating income and improvements in working capital, offset
by increased capital spending. During the most recent three-month period ended
September 30, 2019 adjusted free cash flow was $91.6 million as compared to
$64.4 million in the same period of 2018. Additional information, including a
reconciliation of adjusted free cash flow to net cash from operating activities,
appears below under the heading "Adjusted Free Cash Flow."

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Segment Performance
The primary financial measure by which we evaluate the performance of our
segments is Adjusted EBITDA. The following table sets forth certain financial
information associated with our results of operations for the three and nine
months ended September 30, 2019 and September 30, 2018 (in thousands, except
percentages).
                                                                                       Summary of Operations
                                                 For the Three Months Ended                                             For the Nine Months Ended
                                                                               $           %                                                          $           %
                             September 30, 2019      September 30, 2018      Change      Change     September 30, 2019     September 30, 2018      Change       Change
Direct Revenues(1):
Environmental Services      $          586,872      $         542,980      $ 43,892       8.1%     $        1,658,970$        1,570,241$  88,729       5.7%
Safety-Kleen                           306,145                300,885         5,260       1.7                 884,606                873,284        11,322       1.3
Corporate Items                         (1,349 )                 (684 )        (665 )     N/M                  (2,391 )               (1,426 )        (965 )     N/M
Total                                  891,668                843,181        48,487       5.8               2,541,185              2,442,099        99,086       4.1
Cost of Revenues(2):
Environmental Services                 417,954                395,949        22,005       5.6               1,203,367              1,168,349        35,018       3.0
Safety-Kleen                           189,190                183,112         6,078       3.3                 558,609                542,343        16,266       3.0
Corporate Items                          5,610                  1,624         3,986       N/M                  10,075                      2        10,073       N/M
Total                                  612,754                580,685        32,069       5.5               1,772,051              1,710,694        61,357       3.6
Selling, General & Administrative Expenses:
Environmental Services                  47,260                 44,612         2,648       5.9                 126,567                128,857        (2,290 )    (1.8)
Safety-Kleen                            35,629                 38,271        (2,642 )    (6.9)                110,419                116,486        (6,067 )    (5.2)
Corporate Items                         39,412                 38,336         1,076       2.8                 124,047                116,959         7,088       6.1
Total                                  122,301                121,219         1,082       0.9                 361,033                362,302        (1,269 )    (0.4)
Adjusted EBITDA:
Environmental Services                 121,658                102,419        19,239       18.8                329,036                273,035        56,001       20.5
Safety-Kleen                            81,326                 79,502         1,824       2.3                 215,578                214,455         1,123       0.5
Corporate Items                        (46,371 )              (40,644 )      (5,727 )    (14.1)              (136,513 )             (118,387 )     (18,126 )     15.3
Total                       $          156,613      $         141,277      $ 15,336      10.9%     $          408,101     $          369,103     $  38,998      10.6%


_____________________

N/M = not meaningful (1) Direct revenue is revenue allocated to the segment performing the provided

       service.


(2)    Cost of revenue is shown exclusive of items presented separately on the

statements of operations which consist of (i) accretion of environmental

       liabilities and (ii) depreciation and amortization.



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Direct Revenues
There are many factors which have impacted and continue to impact our revenues.
These factors include, but are not limited to: overall industrial activity and
growth in North America, existence or non-existence of large scale environmental
waste and remediation projects, competitive industry pricing, impacts of
acquisitions and divestitures, the level of emergency response projects, general
conditions of the energy related industries, base and blended oil pricing,
market changes relative to the collection of used oil, the number of parts
washers placed at customer sites and foreign currency translation. In addition,
customer efforts to minimalize hazardous waste and changes in regulation can
also impact our revenues.
Environmental Services
                              For the Three Months Ended                    

For the Nine Months Ended

                        September 30,             2019 over 2018               September 30,               2019 over 2018
(in thousands,
except                                             $            %                                           $            %
percentages)         2019          2018          Change      Change        2019            2018           Change      Change
Direct revenues   $ 586,872$ 542,980$   43,892       8.1 %   $ 1,658,970$ 1,570,241$   88,729       5.7 %


Environmental Services direct revenues for the three months ended September 30,
2019 increased $43.9 million from the comparable period in 2018 primarily due to
higher service related revenues and increased volumes of higher priced waste
streams disposed of in our network of facilities. Higher value waste streams at
our incinerator facilities drove an average price per ton increase of
approximately 12%. The utilization rate at our incinerators on an annual
practical capacity of 561,721 tons was 91.5% for the three months
ended September 30, 2019, compared with 83.5% in the comparable period of 2018.
The increase in utilization rate in the three months ended September 30, 2019
from the comparable period in 2018 was primarily due to fewer down days during
the third quarter of 2019. The increase in service related revenues in the
quarter resulted, in part, from a higher frequency of emergency response work
associated with Field and Emergency Response Services offset by lower Industrial
Services revenues. Also included in the change within this segment was the
negative impact of foreign currency translation on our Canadian operations of
$1.1 million.
Environmental Services direct revenues for the nine months ended September 30,
2019 increased $88.7 million from the comparable period in 2018. Higher service
related revenues and higher priced waste streams disposed of in our network of
facilities contributed to the increase in direct revenues in the nine months
ended September 30, 2019. Higher value waste streams at our incinerator
facilities drove an average price per ton increase of approximately 14%. The
utilization rate at our incinerators on an annual practical capacity of 561,721
tons was 83.1% for the nine months ended September 30, 2019, compared with 86.9%
in the comparable period of 2018. The decrease in utilization rate in the nine
months ended September 30, 2019 from the comparable period in 2018 was primarily
due to a high number of down days at our Deer Park facility during the first
quarter which was attributable to a fire at a neighboring facility. The increase
in Field and Emergency Response Services revenues in the nine months ended
September 30, 2019 resulted from increased emergency response related work as
well as overall growth in Field Services. Industrial Services revenues partially
offset this increase as turnaround related services in 2019 were lower than the
comparable period in the prior year. Also included in the change within this
segment was the negative impact of foreign currency translation on our Canadian
operations of $9.5 million.
Safety-Kleen
                             For the Three Months Ended                     

For the Nine Months Ended

                       September 30,             2019 over 2018              September 30,             2019 over 2018
(in thousands,
except                                            $            %                                        $            %

percentages) 2019 2018 Change Change 2019 2018 Change Change Direct revenues $ 306,145$ 300,885$ 5,260 1.7 % $ 884,606$ 873,284$ 11,322 1.3 %



Safety-Kleen direct revenues for the three months ended September 30,
2019 increased $5.3 million from the comparable period in 2018. This increase
was primarily due to growth in the Safety Kleen branch network's core service
offerings, including handling of containerized waste and vacuum services, which
accounted for $5.0 million of incremental revenues from the comparable period in
2018. This growth in direct revenues was driven by both higher service volumes
and pricing. Higher volumes of blended oil sales, primarily from our direct lube
oil program, also drove an incremental $2.4 million of direct revenues. These
increases were partially offset by a decrease in base oil sales of $2.9 million,
primarily driven by a reduction in base oil pricing in response to lower demand
across the base oil market. The impact of foreign currency translation on our
Canadian operations was minimal.
Safety-Kleen direct revenues for the nine months ended September 30,
2019 increased $11.3 million from the comparable period in 2018. The
Safety-Kleen branch network's core service offerings accounted for $17.9 million
of incremental revenues in 2019

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due to higher service volumes and pricing. Higher volumes of blended oil sales,
primarily from our direct lube oil program, and increased pricing of used motor
oil collections contributed $10.4 million and $3.6 million, respectively, to the
growth in direct revenues from the comparable period in 2018. These increases
were partially offset by a $15.6 million decrease in base oil sales due to
reductions in pricing experienced in 2019 in response to lower demand across the
base oil market and lower base oil volumes, most significantly seen in the first
quarter of 2019. Also included in the change within this segment was the
negative impact of foreign currency translation on our Canadian operations of
$3.5 million.
Cost of Revenues
We believe that our ability to manage operating costs is important to our
ability to remain price competitive. We continue to upgrade the quality and
efficiency of our services through the development of new technology and
continued modifications at our facilities, invest in new business opportunities
and aggressively implement strategic sourcing and logistics solutions as well as
other cost reduction initiatives while also continuing to optimize our
management and operating structure in an effort to maintain and increase
operating margins.
Environmental Services
                               For the Three Months Ended                   

For the Nine Months Ended

                          September 30,            2019 over 2018             September 30,            2019 over 2018
(in thousands,                                                   %                                                   %
except percentages)    2019          2018         Change      Change       2019          2018         Change      Change
Cost of revenues    $ 417,954$ 395,949$ 22,005        5.6 %   $1,203,367$1,168,349$ 35,018        3.0 %
As a % of Direct
Revenues                 71.2 %        72.9 %       (1.7 )%                 72.5 %        74.4 %        (1.9 )%


Environmental Services cost of revenues for the three months ended September 30,
2019 increased $22.0 million from the comparable period in 2018 primarily due to
increased equipment and supply costs of $9.7 million, labor and benefits related
costs of $6.9 million and transportation and outside disposal costs of $2.5
million. These increases are expected with the increase in direct revenues. As a
percentage of direct revenues, these costs have decreased due to higher
utilization at our incinerators and greater leverage of our fixed costs during
the three months ended September 30, 2019.
Environmental Services cost of revenues for the nine months ended September 30,
2019 increased $35.0 million from the comparable period in 2018 primarily due to
increased labor and benefits related costs of $12.4 million, equipment and
supply costs of $11.5 million and transportation and outside disposal costs of
$5.0 million. These costs decreased as a percentage of direct revenues due to
greater leverage of our fixed costs during the nine months ended September 30,
2019.
Safety-Kleen
                                For the Three Months Ended                  

For the Nine Months Ended

                           September 30,            2019 over 2018             September 30,            2019 over 2018
(in thousands,                                                    %                                                   %
except percentages)     2019          2018         Change      Change       2019          2018         Change      Change
Cost of revenues     $ 189,190$ 183,112$   6,078       3.3 %   $
558,609     $ 542,343$  16,266       3.0 %
As a % of Direct
Revenues                  61.8 %        60.9 %         0.9 %                  63.1 %        62.1 %         1.0 %


Safety-Kleen cost of revenues for the three months ended September 30, 2019
increased $6.1 million from the comparable period in 2018 primarily due to
increased labor related costs of $3.8 million and transportation and disposal
costs of $1.1 million, offset by a reduction in raw material costs of $2.3
million. The remaining cost increase was spread across various expense
categories. The overall increase in cost of revenues was consistent with the
growth of our core service offerings. Cost as a percentage of direct revenues
remained relatively consistent with the comparable period of 2018.
Safety-Kleen cost of revenues for the nine months ended September 30, 2019
increased $16.3 million from the comparable period in 2018 primarily due to
increased labor related costs of $7.1 million, raw material costs of $3.8
million and transportation and disposal costs of $2.0 million. These increases
in cost of revenues were consistent with the growth of our core service
offerings and blended oil sales. The remaining cost increase was spread across
various expense categories. Costs as a percentage of direct revenues increased
over the comparable period of 2018 due to these costs which outpaced the growth
in direct revenues.
Selling, General and Administrative Expenses
We strive to manage our selling, general and administrative ("SG&A") expenses
commensurate with the overall performance of our segments and corresponding
revenue levels. We believe that our ability to properly align these costs with

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business performance is reflective of our strong management of the businesses and further promotes our ability to remain competitive in the marketplace. Environmental Services

                             For the Three Months Ended                     

For the Nine Months Ended

                        September 30,           2019 over 2018             September 30,             2019 over 2018
 (in thousands,
except                                                        %                                                   %
percentages)          2019         2018        Change      Change       2019          2018         Change       Change
SG&A expenses      $ 47,260$ 44,612$  2,648        5.9 %   $ 126,567$ 128,857$ (2,290 )     (1.8 )%
As a % of Direct
Revenues                8.1 %        8.2 %       (0.1 )%                   7.6 %         8.2 %       (0.6 )%


Environmental Services SG&A expenses for the three months ended September 30,
2019 increased $2.6 million from the comparable period in 2018 primarily due to
increases in salary, benefits and variable compensation related costs, which
were consistent with the growth of the business for the three months ended
September 30, 2019 as compared to September 30, 2018. As a percentage of direct
revenue, SG&A costs remained consistent with the comparable period in 2018. We
expect this trend to continue for the remainder of the year as revenues continue
to exceed prior year levels.
Environmental Services SG&A expenses for the nine months ended September 30,
2019 decreased $2.3 million from the comparable period in 2018 due to a $5.5
million favorable resolution of litigation and a $5.4 million reduction in bad
debt expense resulting from the recovery of certain trade receivables, which
were fully reserved in 2018. These decreases were partially offset by increases
in salary, benefits and variable compensation related costs of $7.2 million,
which were consistent with the growth of the business for the nine months ended
September 30, 2019 as compared to September 30, 2018.
Safety-Kleen
                              For the Three Months Ended                    

For the Nine Months Ended

                         September 30,           2019 over 2018             September 30,             2019 over 2018
(in thousands,                                                 %                                                   %
except percentages)    2019         2018        Change      Change       2019          2018         Change       Change
SG&A expenses       $ 35,629$ 38,271$ (2,642 )    (6.9 )%   $ 110,419$ 116,486$ (6,067 )     (5.2 )%
As a % of Direct
Revenues                11.6 %       12.7 %       (1.1 )%                  12.5 %        13.3 %       (0.8 )%


Safety-Kleen SG&A expenses for the three and nine months ended September 30,
2019 decreased $2.6 million and $6.1 million, respectively, from the comparable
periods in 2018 primarily due to decreases in payroll and variable compensation
costs resulting from lower headcount and cost saving initiatives implemented by
the business in recent periods. As a percentage of direct revenue, SG&A expenses
decreased from the comparable periods in 2018 as a result of lower costs and
increased revenues generated by the business.
Corporate Items
                            For the Three Months Ended                      

For the Nine Months Ended

                      September 30,            2019 over 2018              September 30,             2019 over 2018
(in thousands,
except                                          $            %                                        $            %

percentages) 2019 2018 Change Change 2019 2018 Change Change SG&A expenses $ 39,412$ 38,336$ 1,076 2.8 % $ 124,047$ 116,959$ 7,088 6.1 %



Corporate Items SG&A expenses for the three months ended September 30, 2019
increased $1.1 million from the comparable period in 2018 primarily due to
increased stock-based compensation expense of $0.9 million. Included in this
change of Corporate Items SG&A expense was an increase in benefits related costs
offset by a decrease in variable compensation.
Corporate Items SG&A expenses for the nine months ended September 30, 2019
increased $7.1 million from the comparable period in 2018 primarily due to our
increased investment in our employees. During the nine months ended
September 30, 2019, salary, benefits and variable compensation related costs
increased by $8.9 million and stock-based compensation increased by $3.9 million
from the comparable period in 2018. These increases were partially offset by a
$3.4 million reduction in professional fees.

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Adjusted EBITDA
Management considers Adjusted EBITDA to be a measurement of performance which
provides useful information to both management and investors. Adjusted EBITDA
should not be considered an alternative to net income or other measurements
under generally accepted accounting principles ("GAAP"). Adjusted EBITDA is not
calculated identically by all companies and therefore our measurements of
Adjusted EBITDA, while defined consistently and in accordance with our existing
credit agreement, may not be comparable to similarly titled measures reported by
other companies.
                               For the Three Months Ended                   

For the Nine Months Ended

                          September 30,            2019 over 2018             September 30,             2019 over 2018
(in thousands,                                      $           %                                       $            %
except percentages)    2019          2018         Change      Change       2019          2018         Change      Change
Adjusted EBITDA:
Environmental
Services            $ 121,658$ 102,419$ 19,239      18.8  %   $ 329,036$ 273,035$ 56,001       20.5  %
Safety-Kleen           81,326        79,502        1,824       2.3        215,578       214,455        1,123        0.5
Corporate Items       (46,371 )     (40,644 )     (5,727 )   (14.1 )     (136,513 )    (118,387 )    (18,126 )    (15.3 )
Total               $ 156,613$ 141,277$ 15,336      10.9  %   $ 408,101$ 369,103$ 38,998       10.6  %


We use Adjusted EBITDA to enhance our understanding of our operating
performance, which represents our views concerning our performance in the
ordinary, ongoing and customary course of our operations. We historically have
found it helpful, and believe that investors have found it helpful, to consider
an operating measure that excludes certain expenses relating to transactions not
reflective of our core operations.
The information about our operating performance provided by this financial
measure is used by our management for a variety of purposes. We regularly
communicate Adjusted EBITDA results to our lenders since our loan covenants are
based upon levels of Adjusted EBITDA achieved and to our board of directors and
we discuss with the board our interpretation of such results. We also compare
our Adjusted EBITDA performance against internal targets as a key factor in
determining cash and stock bonus compensation for executives and other
employees, largely because we believe that this measure is indicative of how the
fundamental business is performing and is being managed.
We also provide information relating to our Adjusted EBITDA so that analysts,
investors and other interested persons have the same data that we use to assess
our core operating performance. We believe that Adjusted EBITDA should be viewed
only as a supplement to the GAAP financial information. We also believe,
however, that providing this information in addition to, and together with, GAAP
financial information permits the users of our financial statements to obtain a
better understanding of our core operating performance and to evaluate the
efficacy of the methodology and information used by management to evaluate and
measure such performance on a standalone and a comparative basis.
The following is a reconciliation of net income to Adjusted EBITDA for the
following periods (in thousands, except percentages):
                                            For the Three Months Ended          For the Nine Months Ended
                                                   September 30,                      September 30,
                                               2019              2018              2019              2018
Net income                               $      36,369$    31,089$      73,589$   49,205
Accretion of environmental liabilities           2,490             2,450             7,624            7,328
Depreciation and amortization                   73,756            73,082           223,328          220,686
Other expense (income), net                        427               996            (1,992 )            449
Loss on early extinguishment of debt             6,119             2,469             6,119            2,469
Interest expense, net of interest income        19,702            19,916            59,681           60,955
Provision for income taxes                      17,750            11,275            39,752           28,011
Adjusted EBITDA                          $     156,613$   141,277$     408,101$  369,103
As a % of Direct Revenues                         17.6 %            16.8 %            16.1 %           15.1 %




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Depreciation and Amortization

                                 For the Three Months Ended                            For the Nine Months Ended
                          September 30,              2019 over 2018              September 30,             2019 over 2018
(in thousands,                                        $             %                                       $            %
except percentages)     2019          2018          Change       Change       2019          2018          Change      Change
Depreciation of
fixed assets and
amortization of
landfills and
finance lease        $  65,335$ 64,938$    397           0.6 %   $ 196,729$ 194,729$    2,000       1.0 %
Permits and other
intangibles
amortization             8,421        8,144          277           3.4        26,599        25,957            642       2.5
Total depreciation
and amortization     $  73,756$ 73,082$    674           0.9 %   

$ 223,328$ 220,686$ 2,642 1.2 %




Depreciation and amortization for the three months ended September 30, 2019
increased by $0.7 million from the comparable period in 2018 primarily due to an
increase in capital spending.
Depreciation and amortization for the nine months ended September 30, 2019
increased by $2.6 million from the comparable period in 2018 due to incremental
depreciation from increased capital spending and acquisitions, partially offset
by lower volumes at our landfills in 2019, which reduced landfill amortization.
Loss on Early Extinguishment of Debt
                              For the Three Months Ended                    

For the Nine Months Ended

                         September 30,          2019 over 2018          September 30,          2019 over 2018
(in thousands,                                   $           %                                  $           %
except percentages)    2019        2018        Change     Change      2019        2018        Change     Change
Loss on early
extinguishment of
debt                 $ 6,119$ 2,469$  3,650     147.8 %   $ 6,119

$ 2,469$ 3,650 147.8 %



During the three and nine months ended September 30, 2019, we recorded a $6.1
million loss on early extinguishment of debt in connection with the
extinguishment of the $845.0 million of unsecured senior notes due 2021 which
were repaid during the current quarter using the funds from the issuance of
$545.0 million of unsecured senior notes due 2027 and $300.0 million of
unsecured senior notes due 2029 and some available cash. During the three and
nine months ended September 30, 2018, we recorded a $2.5 million loss on early
extinguishment of debt in connection with the extinguishment of $400.0 million
of senior unsecured notes which were refinanced in connection with an
Incremental Facility Amendment to our Term Loan Agreement during the third
quarter of 2018. The losses on early extinguishment of debt consisted of amounts
paid in excess of par in order to extinguish the debt prior to maturity of $2.7
million and $1.2 million for the 2019 and 2018 transactions, respectively, and
non-cash expenses related to the write-off of unamortized financing costs of
$3.4 million and $1.3 million for the 2019 and 2018 transactions, respectively.
For additional information regarding our financing arrangements, see Note 11,
"Financing Arrangements" to the accompanying unaudited consolidated financial
statements.
Provision for Income Taxes
                               For the Three Months Ended                   

For the Nine Months Ended

                          September 30,           2019 over 2018            September 30,           2019 over 2018
(in thousands,                                      $           %                                     $           %
except percentages)     2019         2018        Change      Change       2019         2018        Change      Change
Provision for income
taxes                $ 17,750$ 11,275$   6,475      57.4 %   $ 

39,752 $ 28,011$ 11,741 41.9 %



The provision for income taxes for the three and nine months ended September 30,
2019 increased $6.5 million and $11.7 million, respectively, from the comparable
periods in 2018. The increase in the three and nine months ended September 30,
2019 was primarily due to increased taxable income in the United States. The
increase in the three months ended September 30, 2019 as compared to the same
period in 2018 was also driven by tax benefits recorded in the third quarter of
2018 resulting from filing amended returns for prior periods. Our effective tax
rate for the three and nine months ended September 30, 2019 was 32.8% and 35.1%,
respectively, compared to 26.6% and 36.3%, respectively, for the same periods in
2018.

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For the nine months ended September 30, 2019, we did not record $4.8 million of
income tax benefits generated from losses at certain of our Canadian entities.
This compares to $6.6 million of income tax benefits generated in the comparable
period of 2018 which also were not recorded in that period's income tax
provision.
Liquidity and Capital Resources
                                          Nine Months Ended
                                            September 30,
(in thousands)                           2019          2018

Net cash from operating activities $ 284,675$ 247,215 Net cash used in investing activities (187,109 ) (299,482 ) Net cash used in financing activities (44,132 ) (50,414 )



Net cash from operating activities
Net cash from operating activities for the nine months ended September 30, 2019
was $284.7 million, an increase of $37.5 million from the comparable period in
2018. The increase in operating cash flows from the comparable period of 2018
was attributable to greater levels of operating income and improvements in
working capital, partially offset by increased environmental expenditures. We
believe that net cash from operating activities for 2019 will continue to
improve year-over-year as we continue to generate higher earnings.
Net cash used in investing activities
Net cash used in investing activities for the nine months ended September 30,
2019 was $187.1 million, a decrease of $112.4 million from the comparable period
in 2018. The change was primarily driven by a decrease in cash paid for
acquisitions, which was greater during the nine months ended September 30, 2018
due to the acquisition of the Veolia Business on February 23, 2018. This
decrease was partially offset by increased capital expenditure levels, net of
disposals, which we expect to be approximately $200.0 million by the end of
2019.
Net cash used in financing activities
Net cash used in financing activities for the nine months ended September 30,
2019 was $44.1 million, a decrease of $6.3 million from the comparable period in
2018. The change in net cash used in financing activities was primarily due to a
decrease in repurchases of common stock, partially offset by an increase in
deferred financing costs paid to issue the unsecured senior notes in 2019 as
compared to the deferred financing costs paid as a result of the expansion of
our Term Loan in 2018. For additional information regarding our financing
activities, see Note 11, "Financing Arrangements" to the accompanying unaudited
consolidated financial statements.
Adjusted Free Cash Flow
Management considers adjusted free cash flow to be a measurement of liquidity
which provides useful information to both management, creditors and investors
about our financial strength and our ability to generate cash. Additionally,
adjusted free cash flow is a metric on which a portion of management incentive
compensation is based. We define adjusted free cash flow as net cash from
operating activities, excluding cash impacts of items derived from non-operating
activities such as taxes paid in connection with divestitures, less additions to
property, plant and equipment plus proceeds from sales or disposals of fixed
assets. Adjusted free cash flow should not be considered an alternative to net
cash from operating activities or other measurements under GAAP. Adjusted free
cash flow is not calculated identically by all companies, and therefore our
measurements of adjusted free cash flow may not be comparable to similarly
titled measures reported by other companies.
The following is a reconciliation of net cash from operating activities to
adjusted free cash flow for the following periods (in thousands):
                                                    Nine Months Ended
                                                      September 30,
                                                   2019          2018
Net cash from operating activities              $ 284,675$ 247,215

Additions to property, plant and equipment (174,533 ) (150,722 ) Proceeds from sale and disposal of fixed assets 8,948 6,111 Adjusted free cash flow

                         $ 119,090$ 102,604



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Working Capital
At September 30, 2019, cash and cash equivalents and marketable securities
totaled $329.1 million, compared to $279.4 million at December 31, 2018. At
September 30, 2019, cash and cash equivalents held by our foreign subsidiaries
totaled $68.1 million and were readily convertible into other currencies
including U.S. dollars. At September 30, 2019, the cash and cash equivalents and
marketable securities balance for our U.S. operations was $261.0 million, and
our U.S. operations had net operating cash flows of $276.0 million for the nine
months ended September 30, 2019. Additionally, we have a $400.0 million
revolving credit facility of which approximately $231.1 million was available to
borrow at September 30, 2019. Based on the above and on our current plans, we
believe that our U.S. operations have and will continue to have adequate
financial resources to satisfy their current liquidity needs.
We assess our liquidity in terms of our ability to generate cash to fund our
operating, investing and financing activities. Our primary ongoing cash
requirements will be to fund operations, capital expenditures, interest payments
and investments in line with our business strategy. We believe our future
operating cash flows will be sufficient to meet our future operating and
internal investing cash needs as well as any cash needs relating to our stock
repurchase program. Furthermore, our existing cash balance and the availability
of additional borrowings under our revolving credit facility provide additional
potential sources of liquidity should they be required.
Financing Arrangements
Financing arrangements are discussed in Note 11, "Financing Arrangements," to
our unaudited consolidated financial statements included in this report. As
discussed therein, we refinanced a portion of our debt portfolio in July 2019
whereby the $845.0 million of previously outstanding 5.125% unsecured senior
notes due 2021 were replaced by $545.0 million of 4.875% unsecured senior notes
due 2027 and $300.0 million of 5.125% unsecured senior notes due 2029. We
continue to monitor our debt instruments and evaluate opportunities where it may
be beneficial to refinance or reallocate the portfolio.
As of September 30, 2019, we were in compliance with the covenants of all our
debt agreements, and we believe it is reasonably likely that we will continue to
meet such covenants.
Environmental Liabilities
(in thousands, except
percentages)                    September 30, 2019       December 31, 2018        $ Change          % Change
Closure and post-closure
liabilities                   $             74,159     $            69,931     $       4,228             6.0  %
Remedial liabilities                       117,269                 121,017            (3,748 )          (3.1 )
Total environmental
liabilities                   $            191,428     $           190,948     $         480             0.3  %


Total environmental liabilities as of September 30, 2019 were $191.4 million, an
increase of $0.5 million compared to December 31, 2018 primarily due to
accretion of $7.6 million, changes in environmental liability estimates recorded
to the balance sheet of $3.8 million and new asset retirement obligations and
liabilities assumed in acquisitions of $1.9 million, partially offset by
expenditures of $12.8 million.
We anticipate our environmental liabilities, substantially all of which we
assumed in connection with our acquisitions, will be payable over many years and
that cash flow from operations will generally be sufficient to fund the payment
of such liabilities when required. However, events not anticipated (such as
future changes in environmental laws and regulations) could require that such
payments be made earlier or in greater amounts than currently anticipated, which
could adversely affect our results of operations, cash flow and financial
condition.
Capital Expenditures
We anticipate that 2019 capital spending, net of disposals, will be in the range
of $190.0 million to $210.0 million. However, unanticipated changes in
environmental regulations could require us to make significant capital
expenditures for our facilities and adversely affect our results of operations
and cash flow.
Critical Accounting Policies and Estimates
There were no material changes in the first nine months of 2019 to the
information provided under the heading "Critical Accounting Policies and
Estimates" included in our Annual Report on Form 10-K for the year ended
December 31, 2018. New accounting policies adopted during the quarter are
described in Note 2, "Significant Accounting Policies," to our unaudited
consolidated financial statements included in this report.

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