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
March 31, 2004
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 twelve 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). 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 |
14,047,449 | |
| (Class) | (Outstanding at April 21, 2004) |
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page No. | ||
| 1 | ||
| 3 | ||
| 4 | ||
| 5 | ||
| 6 | ||
| ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30 | |
| ITEM 3: Quantitative and Qualitative Disclosures About Market Risk |
43 | |
| 45 | ||
| 47 | ||
| 48 |
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Unaudited
ASSETS
(in thousands)
| March 31, 2004 |
December 31, 2003 | |||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 5,016 | $ | 6,331 | ||
| Accounts receivable, net of allowance for doubtful accounts of $3,140 and $3,572, respectively |
109,563 | 114,429 | ||||
| Unbilled accounts receivable |
6,040 | 9,476 | ||||
| Deferred costs |
5,480 | 5,395 | ||||
| Prepaid expenses |
11,372 | 8,582 | ||||
| Supplies inventories |
9,244 | 9,018 | ||||
| Deferred tax asset |
176 | 178 | ||||
| Properties held for sale |
12,285 | 12,690 | ||||
| Total current assets |
159,176 | 166,099 | ||||
| Property, plant, and equipment: |
||||||
| Land |
14,477 | 15,391 | ||||
| Landfill assets |
4,172 | 2,680 | ||||
| Buildings and improvements |
84,952 | 84,649 | ||||
| Vehicles and equipment |
167,425 | 164,693 | ||||
| Furniture and fixtures |
2,283 | 2,604 | ||||
| Construction in progress |
30,098 | 25,931 | ||||
| Non-landfill asset retirement costs |
993 | 994 | ||||
| 304,400 | 296,942 | |||||
| Less—accumulated depreciation and amortization |
134,805 | 130,400 | ||||
| 169,595 | 166,542 | |||||
| Other assets: |
||||||
| Restricted cash |
89,025 | 88,817 | ||||
| Deferred financing costs |
6,372 | 6,297 | ||||
| Goodwill |
19,032 | 19,032 | ||||
| Permits and other intangibles, net |
78,345 | 79,811 | ||||
| Deferred tax asset |
6,505 | 6,594 | ||||
| Other |
6,687 | 6,967 | ||||
| 205,966 | 207,518 | |||||
| Total assets |
$ | 534,737 | $ | 540,159 | ||
The accompanying notes are an integral part of these consolidated financial statements.
1
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Unaudited
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(dollars in thousands)
| March 31, 2004 |
December 31, 2003 |
|||||||
| Current liabilities: |
||||||||
| Uncashed checks |
$ | 6,024 | $ | 5,983 | ||||
| Revolving credit facility |
35,153 | 35,291 | ||||||
| Current portion of capital lease obligations |
1,423 | 1,207 | ||||||
| Accounts payable |
55,402 | 60,611 | ||||||
| Accrued disposal costs |
2,359 | 2,021 | ||||||
| Deferred revenue |
23,535 | 22,799 | ||||||
| Other accrued expenses |
32,129 | 32,240 | ||||||
| Current portion of environmental liabilities |
21,050 | 21,282 | ||||||
| Income taxes payable |
4,384 | 2,623 | ||||||
| Total current liabilities |
181,459 | 184,057 | ||||||
| Other liabilities: |
||||||||
| Environmental liabilities, less current portion |
161,644 | 161,849 | ||||||
| Long-term obligations, less current maturities |
146,635 | 147,209 | ||||||
| Capital lease obligations, less current portion |
4,064 | 3,412 | ||||||
| Other long-term liabilities |
12,728 | 18,055 | ||||||
| Accrued pension cost |
624 | 633 | ||||||
| Total other liabilities |
325,695 | 331,158 | ||||||
| Commitments and contingent liabilities |
||||||||
| Redeemable Series C Convertible Preferred Stock, $.01 par value: Authorized 25,000 shares; Issued and outstanding 25,000 shares (liquidation preference of $26.5 million), net of issuance costs and fair value of embedded derivative |
16,375 | 15,631 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $.01 par value: |
||||||||
| Series A convertible preferred stock; Authorized 2,000,000 shares; issued and outstanding—none |
— | — | ||||||
| Series B convertible preferred stock; Authorized 154,416 shares; issued and outstanding 112,000 shares (liquidation preference of $5.6 million) |
1 | 1 | ||||||
| Common stock, $.01 par value: |
||||||||
| Authorized 20,000,000 shares; issued and outstanding 14,009,645 and 13,911,212 shares, respectively |
140 | 139 | ||||||
| Additional paid-in capital |
63,136 | 63,642 | ||||||
| Accumulated other comprehensive income |
6,035 | 6,452 | ||||||
| Accumulated deficit |
(58,104 | ) | (60,921 | ) | ||||
| Total stockholders’ equity |
11,208 | 9,313 | ||||||
| Total liabilities, redeemable convertible preferred stock and stockholders’ equity |
$ | 534,737 | $ | 540,159 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
2
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands except per share amounts)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Revenues |
$ | 142,757 | $ | 142,305 | ||||
| Cost of revenues |
107,460 | 106,614 | ||||||
| Selling, general and administrative expenses |
23,204 | 27,089 | ||||||
| Accretion of environmental liabilities |
2,588 | 2,733 | ||||||
| Depreciation and amortization |
5,405 | 6,648 | ||||||
| Restructuring |
— | (124 | ) | |||||
| Income (loss) from operations |
4,100 | (655 | ) | |||||
| Other income |
5,287 | 17 | ||||||
| Interest (expense), net |
(5,358 | ) | (5,510 | ) | ||||
| Income (loss) before provision for income taxes and cumulative effect of change in accounting principle |
4,029 | (6,148 | ) | |||||
| Provision for income taxes |
1,212 | 988 | ||||||
| Net income (loss) before cumulative effect of change in accounting principle |
2,817 | (7,136 | ) | |||||
| Cumulative effect of change in accounting principle, net of tax |
— | 66 | ||||||
| Net income (loss) |
2,817 | (7,202 | ) | |||||
| Dividends and accretion on preferred stock |
855 | 804 | ||||||
| Net income (loss) attributable to common shareholders |
$ | 1,962 | $ | (8,006 | ) | |||
| Basic earnings (loss) per share: |
||||||||
| Income (loss) before cumulative effect of change in accounting principle |
$ | 0.14 | $ | (0.60 | ) | |||
| Cumulative effect of change in accounting principle, net of tax |
— | — | ||||||
| Basic earnings (loss) attributable to common shareholders |
$ | 0.14 | $ | (0.60 | ) | |||
| Diluted loss per share: |
||||||||
| Loss before cumulative effect of change in accounting principle |
$ | (0.08 | ) | $ | (0.60 | ) | ||
| Cumulative effect of change in accounting principle, net of tax |
— | — | ||||||
| Diluted loss attributable to common shareholders |
$ | (0.08 | ) | $ | (0.60 | ) | ||
| Weighted average common shares outstanding |
13,960 | 13,270 | ||||||
| Weighted average common shares outstanding plus potentially dilutive common shares |
16,392 | 13,270 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 2,817 | $ | (7,202 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
5,405 | 6,648 | ||||||
| Cumulative effect of change in accounting principle, net of tax |
— | 66 | ||||||
| Allowance for doubtful accounts |
145 | 393 | ||||||
| Amortization of deferred financing costs |
753 | 537 | ||||||
| Accretion of environmental liabilities |
2,588 | 2,733 | ||||||
| (Gain) loss on sale of fixed assets |
(244 | ) | 25 | |||||
| Stock options expensed |
— | 7 | ||||||
| Gain on embedded derivative |
(5,287 | ) | (17 | ) | ||||
| Foreign currency (gain) loss on intercompany transactions |
(54 | ) | 294 | |||||
| Changes in assets and liabilities, net of acquisition: |
||||||||
| Accounts receivable |
4,531 | 14,176 | ||||||
| Unbilled accounts receivable |
3,376 | 2,600 | ||||||
| Deferred costs |
(95 | ) | 917 | |||||
| Prepaid expenses |
(2,794 | ) | 2,265 | |||||
| Supplies inventories |
(230 | ) | (101 | ) | ||||
| Other assets |
265 | (1,050 | ) | |||||
| Accounts payable |
(5,050 | ) | (5,068 | ) | ||||
| Environmental liabilities |
(3,037 | ) | (2,888 | ) | ||||
| Deferred revenue |
785 | (5,058 | ) | |||||
| Accrued disposal costs |
345 | (6 | ) | |||||
| Other accrued expenses |
102 | (3,304 | ) | |||||
| Income taxes payable |
1,768 | 849 | ||||||
| Net cash provided by operating activities |
6,089 | 6,816 | ||||||
| Cash flows from investing activities: |
||||||||
| Additions to property, plant and equipment |
(6,088 | ) | (8,461 | ) | ||||
| Cost of restricted investments purchased |
(208 | ) | (222 | ) | ||||
| Proceeds from sale of fixed assets |
574 | 228 | ||||||
| Net cash used in investing activities |
(5,722 | ) | ||||||