UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A

 

Amendment No. 1 to

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): December 28, 2012

 

CLEAN HARBORS, INC.

(Exact name of registrant as specified in its charter)

 

Massachusetts

 

001-34223

 

04-2997780

(State or other jurisdiction

 

(Commission

 

(IRS Employer

of incorporation)

 

File Number)

 

Identification No.)

 

42 Longwater Drive, Norwell,

 

 

Massachusetts

 

02061-9149

(Address of principal executive offices)

 

(Zip Code)

 

(781) 792-5000

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Explanatory Note

 

On January 4, 2013, Clean Harbors, Inc. (the “Company,” “Clean Harbors,” or “we”) filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Initial 8-K Report”) reporting, among other matters, the Company’s acquisition on December 28, 2012 of all of the outstanding shares of Safety-Kleen, Inc., a Delaware corporation (“Safety-Kleen”).

 

In accordance with Item 9.01 of Form 8-K, the Initial 8-K Report included the historical financial statements of Safety-Kleen and the unaudited pro forma condensed combined financial information of the Company (collectively, the “Financial Information”). This Amendment is being filed to revise the Company’s condensed combined financial information required by Item 9.01(b) of Form 8-K, and this Amendment should be read in conjunction with the Initial 8-K Report including, in particular, the historical financial statements of Safety-Kleen included in the Financial Information as originally filed.

 

Item 9.01        Financial Statements and Exhibits.

 

 

Page

 

(b)  Pro Forma Financial Information

 

 

 

Unaudited Pro Forma Condensed Combined Financial Statements:

 

 

 

Unaudited Pro Forma Condensed Combined Financial Information

2

Unaudited Pro Forma Condensed Combined Balance Sheet as at September 30, 2012

4

Unaudited Pro Forma Condensed Combined Statement of Income for the Year Ended December 31, 2011

6

Unaudited Pro Forma Condensed Combined Statement of Income for the Nine Months Ended September 30, 2012

7

Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

8

 

1



 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

On October 26, 2012, Clean Harbors, Inc. (“Clean Harbors” or “we”) signed an agreement and plan of merger to acquire Safety-Kleen, Inc. (“Safety-Kleen”) for a purchase price (subject to certain working capital and other adjustments) of $1,250.0 million. The merger agreement was subsequently closed on December 28, 2012. Under the terms of the merger agreement, we agreed to pay to the Safety-Kleen shareholders and option holders cash consideration in an amount equal to $1,250.0 million plus the amount of cash and cash equivalents held by Safety-Kleen on the closing date less the amount of debt held by Safety-Kleen on the closing date, plus or minus, as applicable, the amount by which Safety-Kleen’s working capital (excluding cash) on the closing date exceeded or was less than $50.0 million. The amount of Safety-Kleen’s working capital on the closing date was reduced by the amount of Safety-Kleen’s legal and other expenses in connection with the merger and related transactions except to the extent that Safety-Kleen had previously paid such expenses.

 

We funded the purchase price for Safety-Kleen and paid our related fees and expenses through (i) our available cash, (ii) our sale on December 3, 2012 in a public offering of 6.9 million shares of our common stock at a public offering price of $56.00 per share (the “Stock Offering”), and (iii) our sale on December 7, 2012 in a private offering of $600.0 million aggregate principal amount of 5.125% senior unsecured notes due 2021 (the “Notes Offering”). The following unaudited pro forma condensed combined financial information for Clean Harbors and Safety-Kleen as a combined company gives effect to (i) the Stock Offering, (ii) the Notes Offering, (iii) the acquisition method of accounting for our acquisition of Safety-Kleen, and (iv) payment of our related fees and expenses (collectively, the “Transactions”). The unaudited pro forma condensed combined balance sheet as at September 30, 2012 is presented as if the Transactions had been completed on September 30, 2012. The unaudited pro forma condensed combined statements of income for the year ended December 31, 2011 and for the nine months ended September 30, 2012 are presented as if the Transactions had been completed on January 1, 2011, the first day of our fiscal 2011.

 

The following unaudited pro forma condensed combined financial information is based on the historical financial statements of Clean Harbors and Safety-Kleen described below. Both Safety-Kleen’s and our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our fiscal year is different than Safety-Kleen’s historical fiscal year. Our fiscal year ends on December 31, while Safety-Kleen has utilized a 53-week fiscal year comprised of 12 periods consisting of four weeks with the exception of period 13 which consisted of five weeks, each ending on a Saturday. The unaudited pro forma condensed combined balance sheet combines our historical condensed combined balance sheet as at September 30, 2012 with Safety-Kleen’s historical consolidated balance sheet as at October 6, 2012. The unaudited pro forma combined statement of income for the nine months ended September 30, 2012 combines our historic consolidated statement of income for the nine months ended September 30, 2012 with Safety-Kleen’s historical consolidated statement of income for the 40 weeks ended October 6, 2012. Safety-Kleen’s fiscal year end did not differ from ours for the year ended December 31, 2011.

 

The following unaudited pro forma condensed combined financial information does not purport to represent what our results of operations or financial position would actually have been had the Transactions occurred on the dates described above or to project our results of operations or financial position for any future date or period. The information does not reflect cost savings, operating synergies or revenue enhancements expected to result from our acquisition of Safety-Kleen or the costs to achieve any such cost savings, operating synergies or revenue enhancements. The information reflects our preliminary estimates of the allocation of the purchase price for Safety-Kleen based upon available information and certain assumptions that we believe are reasonable under the circumstances, and actual results could differ materially from these anticipated results. The final allocation of the purchase price will be determined after completion of the merger and will be based on the final purchase price, as it may be adjusted in accordance with the merger agreement, and Safety-Kleen’s tangible and identifiable intangible assets acquired and liabilities assumed.

 

The following unaudited pro forma condensed combined financial information and the accompanying notes should be read together with (1) Clean Harbors’ audited consolidated financial statements and accompanying notes, as of and for the fiscal year ended December 31, 2011, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Clean Harbors’ Annual Report on Form 10-K for the fiscal year

 

2



 

ended December 31, 2011, which was filed with the SEC on February 29, 2012, as such audited financial statements, notes and Management’s Discussion and Analysis were subsequently superseded or modified through Clean Harbors’ Report on Form 8-K filed on July 16, 2012, (2) Clean Harbors’ unaudited condensed consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2012 and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Clean Harbors’ Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012, which was filed with the SEC on November 9, 2012, (3) Safety-Kleen’s audited consolidated financial statements as of and for the years ended December 26, 2009, December 25, 2010, and December 31, 2011, included in Clean Harbors’ Report on Form 8-K which was filed with the SEC on January 4, 2013 (the “Initial Form 8-K Report”), and (4) Safety-Kleen’s unaudited condensed consolidated financial statements as of and for the 40 weeks ended October 1, 2011 and October 6, 2012, included in the Initial Form 8-K Report.

 

3



 

CLEAN HARBORS, INC. AND SUBSIDIARIES

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

 

ASSETS

 

AS AT SEPTEMBER 30, 2012

 

(dollars in thousands)

 

 

 

Clean
Harbors

 

Safety-Kleen

 

Acquisition
Pro Forma
Adjustments

 

Notes

 

Acquisition
Pro Forma

 

Stock and
Notes
Offerings

Pro Forma
Adjustments

 

Notes

 

Pro Forma

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

523,614

 

$

48,253

 

$

(1,299,024

)

(a)

 

$

(727,157

)

$

952,731

 

(a)

 

$

225,574

 

Marketable securities

 

11,113

 

 

 

 

 

11,113

 

 

 

 

11,113

 

Accounts receivable, net

 

399,362

 

171,643

 

(5,064

)

(b),(h)

 

565,941

 

 

 

 

565,941

 

Unbilled accounts receivable

 

34,401

 

 

3,061

 

(b)

 

37,462

 

 

 

 

37,462

 

Deferred costs

 

6,995

 

 

10,733

 

(b)

 

17,728

 

 

 

 

17,728

 

Prepaid expenses and other current assets

 

53,252

 

25,363

 

(24,068

)

(a),(b),(c)

 

54,547

 

 

 

 

54,547

 

Supplies inventories

 

63,934

 

89,544

 

14,736

 

(d)

 

168,214

 

 

 

 

168,214

 

Deferred tax assets

 

16,617

 

11,054

 

 

 

 

27,671

 

 

 

 

27,671

 

Total current assets

 

1,109,288

 

345,857

 

(1,299,626

)

 

 

155,519

 

952,731

 

 

 

1,108,250

 

Property, plant and equipment, net

 

1,003,414

 

317,004

 

364,660

 

(b),(e)

 

1,685,078

 

 

 

 

1,685,078

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investments

 

4,326

 

 

 

 

 

4,326

 

 

 

 

4,326

 

Deferred financing costs

 

12,530

 

 

 

 

 

12,530

 

10,559

 

(g)

 

23,089

 

Goodwill

 

157,724

 

36,787

 

275,753

 

(i)

 

470,264

 

 

 

 

470,264

 

Permits and other intangibles, net

 

151,810

 

83,369

 

373,531

 

(b),(f)

 

608,710

 

 

 

 

608,710

 

Deferred tax assets

 

 

57,756

 

(57,756

)

(b)

 

 

 

 

 

 

Other

 

10,311

 

7,515

 

52,991

 

(b),(c)

 

70,817

 

 

 

 

70,817

 

Total other assets

 

336,701

 

185,427

 

644,519

 

 

 

1,166,647

 

10,559

 

 

 

1,177,206

 

Total assets

 

$

2,449,403

 

$

848,288

 

$

(290,447

)

 

 

$

3,007,244

 

$

963,290

 

 

 

$

3,970,534

 

 

See accompanying notes to unaudited pro forma condensed combined financial statements.

 

4



 

CLEAN HARBORS, INC. AND SUBSIDIARIES

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

AS AT SEPTEMBER 30, 2012

 

(dollars in thousands)

 

 

 

Clean Harbors

 

Safety-Kleen

 

Acquisition
Pro Forma
Adjustments

 

Notes

 

Acquisition
Pro Forma

 

Stock and
Notes
Offerings

Pro Forma
Adjustments

 

Notes

 

Pro Forma

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

$

2,500

 

$

(2,500

)

(k)

 

$

 

$

 

 

 

$

 

Current portion of capital lease obligations

 

5,937

 

 

 

 

 

5,937

 

 

 

 

5,937

 

Accounts payable

 

174,327

 

88,191

 

(2,003

)

(h)

 

260,515

 

 

 

 

260,515

 

Deferred revenue

 

29,060

 

32,009

 

 

 

 

61,069

 

 

 

 

61,069

 

Accrued expenses

 

136,687

 

87,006

 

18,964

 

(b),(c),(d),(j)

 

242,657

 

 

 

 

242,657

 

Accrued salaries and benefits

 

 

30,574

 

(30,574

)

(b)

 

 

 

 

 

 

Current portion of closure, post-closure and remedial liabilities

 

19,552

 

7,046

 

 

 

 

26,598

 

 

 

 

26,598

 

Income taxes payable

 

 

1,763

 

(1,763

)

(b)

 

 

 

 

 

 

Total current liabilities

 

365,563

 

249,089

 

(17,876

)

 

 

596,776

 

 

 

 

596,776

 

Other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closure and post-closure liabilities, less current portion

 

29,712

 

 

16,808

 

(b)

 

46,520

 

 

 

 

46,520

 

Remedial liabilities, less current portion

 

117,981

 

 

34,445

 

(b)

 

152,426

 

 

 

 

152,426

 

Environmental liabilities

 

 

51,253

 

(51,253

)

(b)

 

 

 

 

 

 

Long-term obligations, less current maturities

 

800,000

 

220,625

 

(220,625

)

(k)

 

800,000

 

600,000

 

(k)

 

1,400,000

 

Capital lease obligations, less current portion

 

3,477

 

 

 

 

 

3,477

 

 

 

 

3,477

 

Unrecognized tax benefits and other long-term liabilities

 

125,915

 

21,458

 

258,366

 

(e),(f)

 

405,739

 

 

 

 

405,739

 

Total other liabilities

 

1,077,085

 

293,336

 

37,741

 

 

 

1,408,162

 

600,000

 

 

 

2,008,162

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $.01 par value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clean Harbors authorized 80,000,000; pro forma shares issued and outstanding 60,286,280

 

534

 

509

 

(509

)

(l)

 

534

 

69

 

(l)

 

603

 

Shares held under employee participation plan

 

(469

)

 

 

 

 

(469

)

 

 

 

(469

)

Additional paid-in capital

 

508,182

 

390,560

 

(390,560

)

(l)

 

508,182

 

368,409

 

(l)

 

876,591

 

Accumulated other comprehensive income

 

59,056

 

4,675

 

(4,675

)

(l)

 

59,056

 

 

 

 

59,056

 

Accumulated earnings (deficit)

 

439,452

 

(89,881

)

85,432

 

(l)

 

435,003

 

(5,188

)

(l)

 

429,815

 

Total Clean Harbors and Safety-Kleen stockholders’ equity

 

1,006,755

 

305,863

 

(310,312

)

 

 

1,002,306

 

363,290

 

 

 

1,365,596

 

Total liabilities and stockholders’ equity

 

$

2,449,403

 

$

848,288

 

$

(290,447

)

 

 

$

3,007,244

 

$

963,290

 

 

 

$

3,970,534

 

 

See accompanying notes to unaudited pro forma condensed combined financial statements.

 

5



 

CLEAN HARBORS, INC. AND SUBSIDIARIES

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

 

FOR THE YEAR ENDED DECEMBER 31, 2011

 

(in thousands)

 

 

 

Clean Harbors

 

Safety-Kleen

 

Acquisition
Pro Forma
Adjustments

 

Notes

 

Acquisition
Pro Forma

 

Stock and
Notes
Offerings

Pro Forma
Adjustments

 

Notes

 

Pro Forma

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

1,984,136

 

$

576,120

 

$

(13,050

)

(m)

 

$

2,547,206

 

$

 

 

 

$

2,547,206

 

Product revenues

 

 

708,151

 

 

 

 

708,151

 

 

 

 

708,151

 

Total revenues

 

1,984,136

 

1,284,271

 

(13,050

)

 

 

3,255,357

 

 

 

 

3,255,357

 

Costs of revenues (exclusive of items shown separately below)

 

1,379,991

 

1,076,348

 

(50,093

)

(m),(n),(p)

 

2,406,246

 

 

 

 

2,406,246

 

Selling, general and administrative expenses

 

254,137

 

73,842

 

49,610

 

(n)

 

377,589

 

 

 

 

377,589

 

Accretion of environmental liabilities

 

9,680

 

 

2,169

 

(n)

 

11,849

 

 

 

 

11,849

 

Depreciation and amortization

 

122,663

 

66,808

 

17,580

 

(o)

 

207,051

 

 

 

 

207,051

 

Income from operations

 

217,665

 

67,273

 

(32,316

)

 

 

252,622

 

 

 

 

252,622

 

Other income(expense)

 

6,402

 

(5,925

)

 

 

 

477

 

 

 

 

477

 

Interest expense, net

 

(39,389

)

(10,321

)

8,897

 

(q)

 

(40,813

)

(31,992

)

(q)

 

(72,805

)

Income (loss) before provision (benefit) for income taxes

 

184,678

 

51,027

 

(23,419

)

 

 

212,286

 

(31,992

)

 

 

180,294

 

Provision (benefit) for income taxes

 

57,426

 

(84,441

)

(8,197

)

(r)

 

(35,212

)

(11,197

)

(r)

 

(46,409

)

Net income (loss) attributable to Clean Harbors and Safety-Kleen

 

$

127,252

 

$

135,468

 

$

(15,222

)

 

 

$

247,498

 

$

(20,795

)

 

 

$

226,703

 

Earnings per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.40

 

$

2.61

 

 

 

 

 

$

4.67

 

 

 

 

 

$

3.79

 

Diluted

 

$

2.39

 

$

2.55

 

 

 

 

 

$

4.64

 

 

 

 

 

$

3.76

 

Weighted average common shares outstanding

 

52,961

 

51,876

 

(51,876

)

 

 

52,961

 

6,900

 

 

 

59,861

 

Weighted average common shares outstanding plus potentially dilutive common shares

 

53,324

 

53,064

 

(53,064

)

(s)

 

53,324

 

6,900

 

 

 

60,224

 

 

See accompanying notes to unaudited pro forma condensed combined financial statements.

 

6



 

CLEAN HARBORS, INC. AND SUBSIDIARIES

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME

 

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

 

(in thousands)

 

 

 

Clean Harbors

 

Safety-Kleen

 

Acquisition
Pro Forma
Adjustments

 

Notes

 

Acquisition
Pro Forma

 

Stock and
Notes
Offerings

Pro Forma
Adjustments

 

Notes

 

Pro Forma

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

1,628,946

 

$

469,087

 

$

(8,471

)

(m)

 

$

2,089,562

 

$

 

 

 

$

2,089,562

 

Product revenues

 

 

601,897

 

 

 

 

601,897

 

 

 

 

601,897

 

Total revenues

 

1,628,946

 

1,070,984

 

(8,471

)

 

 

2,691,459

 

 

 

 

2,691,459

 

Costs of revenues (exclusive of items shown separately below)

 

1,140,878

 

877,677

 

(48,986

)

(m),(n)

 

1,969,569

 

 

 

 

1,969,569

 

Selling, general and administrative expenses

 

197,892

 

67,109

 

38,628

 

(n)

 

303,629

 

 

 

 

303,629

 

Accretion of environmental liabilities

 

7,409

 

 

1,888

 

(n)

 

9,297

 

 

 

 

9,297

 

Depreciation and amortization

 

116,794

 

49,436

 

13,855

 

(o)

 

180,085

 

 

 

 

180,085

 

Income from operations

 

165,973

 

76,762

 

(13,856

)

 

 

228,879

 

 

 

 

228,879

 

Other expense

 

(465

)

(4,903

)

 

 

 

(5,368

)

 

 

 

(5,368

)

Loss on early extinguishment of debt

 

(26,385

)

 

 

 

 

(26,385

)

 

 

 

(26,385

)

Interest expense, net

 

(33,836

)

(10,284

)

8,980

 

(q)

 

(35,140

)

(23,994

)

(q)

 

(59,134

)

Income (loss) before provision for income taxes

 

105,287

 

61,575

 

(4,876

)

 

 

161,986

 

(23,994

)

 

 

137,992

 

Provision for income taxes

 

37,487

 

19,278

 

(1,706

)

(r)

 

55,059

 

(8,398

)

(r)

 

46,661

 

Net income (loss) attributable to Clean Harbors and Safety-Kleen

 

$

67,800

 

$

42,297

 

$

(3,170

)

 

 

$

106,927

 

$

(15,596

)

 

 

$

91,331

 

Earnings per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.27

 

$

0.82

 

 

 

 

 

$

2.01

 

 

 

 

 

$

1.52

 

Diluted

 

$

1.27

 

$

0.80

 

 

 

 

 

$

2.00

 

 

 

 

 

$

1.51

 

Weighted average common shares outstanding

 

53,303

 

51,622

 

(51,622

)

 

 

53,303

 

6,900

 

 

 

60,203

 

Weighted average common shares outstanding plus potentially dilutive common shares

 

53,519

 

52,880

 

(52,880

)

(s)

 

53,519

 

6,900

 

 

 

60,419

 

 

See accompanying notes to unaudited pro forma condensed combined financial statements.

 

7



 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

1.                                      The Merger

 

On October 26, 2012, Clean Harbors and Safety-Kleen signed an Agreement and Plan of Merger dated as of that date (the “Merger Agreement”) which provided that, subject to the terms and conditions contained in the Merger Agreement, Clean Harbors would acquire Safety-Kleen (the “Merger”). Safety-Kleen, a Delaware corporation headquartered in Richardson, Texas, is the largest re-refiner and recycler of used oil in North America and a leading provider of parts cleaning and environmental services.

 

Under the terms of the Merger Agreement, which was subsequently closed on December 28, 2012, Clean Harbors agreed to pay to the Safety-Kleen’s shareholders and option holders cash consideration in an amount equal to $1,250.0 million plus the amount of cash and cash equivalents held by Safety-Kleen on the closing date, less the amount of debt owed by Safety-Kleen on the closing date for borrowed money and capital lease obligations, plus or minus, as applicable, the amount by which Safety-Kleen’s working capital (excluding cash) on the closing date exceeded or was less than $50.0 million.

 

The following table summarizes the components of the estimated total consideration included in the pro forma condensed combined financial statements as if the Merger had been completed on September 30, 2012 (in thousands):

 

Estimated cash consideration

 

$

1,250,000

 

Plus estimated working capital adjustment at September 30, 2012

 

11,271

 

Estimated total purchase price

 

$

1,261,271

 

 

The following summarizes the preliminary purchase price allocation, as if the Merger had occurred on September 30, 2012 (in thousands):

 

Assets to be acquired:

 

 

 

Accounts receivable

 

$

168,582

 

Unbilled accounts receivable

 

3,061

 

Prepaid expenses and other current assets

 

11,795

 

Deferred costs

 

10,733

 

Inventory

 

104,280

 

Current deferred tax assets

 

11,054

 

Goodwill

 

312,540

 

Property, plant and equipment

 

681,664

 

Permits and other intangible assets

 

456,900

 

Other assets

 

60,505

 

 

 

1,821,114

 

Liabilities to be assumed:

 

 

 

Accounts payable

 

88,191

 

Deferred revenue

 

32,009

 

Accrued expenses

 

101,520

 

Current portion of closure, post-closure and remedial liabilities

 

7,046

 

Closure and post-closure liabilities, less current portion

 

51,253

 

Unrecognized tax benefits and other long-term liabilities

 

279,824

 

 

 

559,843

 

Net assets to be acquired(1)

 

$

1,261,271

 

 


(1)                                 Net assets exclude Safety-Kleen’s cash and cash equivalents, debt and associated costs, other costs related to its proposed initial public offering, stock option liabilities and Safety-Kleen’s goodwill.

 

Clean Harbors has determined preliminary allocation estimates based on limited access to information and will not have sufficient information to make final allocations until after completion of the Merger. Clean Harbors anticipates that the valuations of the acquired assets and liabilities will include, but not be limited to inventory, property, plant and equipment, customer relationships, trademarks, other potential intangible assets and the determination of the effect of the revenue transactions on deferred revenue and the corresponding deferred costs. The valuations will consist of physical appraisals, discounted cash flow analysis or other appropriate valuations techniques to determine the fair value of the assets acquired and

 

8



 

liabilities assumed. Clean Harbors has determined this to be a tax-free business combination from Clean Harbors’ standpoint and has recorded the corresponding deferred tax liabilities related to the preliminary fair value adjustments. Clean Harbors has recorded no other adjustments to deferred income taxes.

 

The amounts allocated to assets to be acquired and liabilities to be assumed in the Merger could differ materially from the preliminary allocation estimates. Decreases or increases in the fair value of assets acquired or liabilities assumed in the Merger from those preliminary valuations presented would result in a corresponding increase or decrease in the amount of goodwill that resulted from the Merger. In addition, if the value of the assets acquired is higher than the preliminary indication, it may result in higher amortization and/or depreciation expense than is presented in these pro forma statements.

 

2.                                      Financing

 

In connection with the Merger, we sold (i) on December 3, 2012 (in the Stock Offering which was priced on November 27, 2012), 6.9 million shares of our common stock at a public offering price of $56.00 per share and (ii) on December 7, 2012, $600.0 million of 5.125% senior unsecured notes due 2021 in the Notes Offering.

 

We estimate that the completion of the Merger and the Notes Offering resulted in a net increase of approximately $10.6 million of deferred financing costs. If the Notes Offering had been completed on January 1, 2011, at the interest rate of 5.125%, interest expense (including amortization of funding expense) would have increased by $33.4 million and $25.1 million for the year ended December 31, 2011 and the nine months ended September 30, 2012, respectively.

 

3.                                      Pro Forma Balance Sheet Adjustments

 

The pro forma adjustments included in the unaudited condensed combined balance sheet are as follows:

 

a)                                     Represents an adjustment to reflect the use of existing cash and the estimated net proceeds from the Stock Offering and the Notes Offering to pay the purchase price for Safety-Kleen and related transaction fees and expenses (in thousands):

 

 

 

Increase (Decrease)

 

 

 

Acquisition Pro
Forma

 

Stock and Notes
Offerings Pro
Forma

 

Gross Stock Offering proceeds

 

$

 

$

386,400

 

Gross Notes Offering proceeds

 

 

600,000

 

Safety-Kleen share payment(1)

 

10,500

 

 

Cash paid for Safety-Kleen

 

(1,250,000

)

 

Safety-Kleen cash and cash equivalents(2)

 

(48,253

)

 

Transaction fees and expenses for the offerings(3)

 

 

(33,669

)

Payment of working capital adjustment

 

(11,271

)

 

 

 

$

(1,299,024

)

$

952,731

 

 


(1)                                 Clean Harbors received and held at the time of the Merger $10.5 million of cash as a result of Safety-Kleen’s 2010 call of shares which Clean Harbors had acquired in Safety-Kleen. This amount was previously recorded in prepaid expenses and other current assets.

 

(2)                                 Existing cash and cash equivalents held by Safety-Kleen on the balance sheet date.

 

(3)                                 Transaction fees and expenses for the offerings consisted of the following:

 

Notes offering

 

$

10,559

 

Stock offering

 

17,922

 

Commitment fees

 

5,188

 

Total

 

$

33,669

 

 

9



 

b)                                     Represents reclassifications to conform Safety-Kleen to Clean Harbors’ financial statement presentation (in thousands):

 

 

 

Increase
(Decrease)

 

Accounts receivable, net

 

$

(3,061

)

Unbilled accounts receivable

 

3,061

 

 

 

 

 

Deferred costs

 

$

10,733

 

Prepaid expenses and other current assets

 

(10,733

)

 

 

 

 

Property, plant and equipment

 

$

15,734

 

Permits and other intangible assets, net

 

(15,734

)

 

 

 

 

Deferred tax asset

 

$

(57,756

)

Other assets

 

57,756

 

 

 

 

 

Accrued expenses

 

$

30,574

 

Accrued salaries and benefits

 

(30,574

)

 

 

 

 

Accrued expenses

 

$

1,763

 

Income taxes payable

 

(1,763

)

 

 

 

 

Closure and post closure liabilities

 

$

16,808

 

Remedial liabilities

 

34,445

 

Environmental liabilities

 

(51,253

)

 

c)                                      Represents adjustments to eliminate Safety-Kleen’s deferred financing and other costs related to its debt and its initial public offering costs of $2.8 million recorded in prepaid expenses and other current assets and $4.8 million recorded in other assets, and eliminate Safety-Kleen’s stock option liability of $22.7 million and other miscellaneous liabilities of $0.3 million recorded in accrued expenses.

 

d)                                    Represents a step-up adjustment of approximately $14.7 million to record the estimated fair value of Safety-Kleen’s oil inventory acquired as of September 30, 2012, which was valued at estimated selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort. The other inventory categories were preliminary determined to be at fair value. Clean Harbors has recorded a current deferred tax liability related to the preliminary fair value adjustment of approximately $5.2 million in accrued expenses based on a 35% statutory tax rate.

 

e)                                  Represents an adjustment of $348.9 million to record the preliminary fair value of property, plant and equipment as of September 30, 2012 using a cost and market approach. The estimated property, plant and equipment are expected to be depreciated on a straight-line basis over estimated useful lives that will range from three to 24 years, subject to the finalization of the purchase price allocation. The pro forma adjustment for property, plant and equipment consisted of the following (in thousands):

 

Property, plant and equipment (i)

 

$

634,267

 

Land

 

47,397

 

Less: Safety-Kleen’s net book value

 

(317,004

)

Less: Safety-Kleen’s software reclassification

 

(15,734

)

Pro forma property, plant and equipment adjustment

 

$

348,926

 

 


(i)

 

 

 

 

 

 

 

Acquisition Pro Forma

 

Estimated Useful Life

 

Buildings and building improvements

 

$

140,000

 

24 years

 

Land and leasehold improvements

 

39,000

 

8-11 years

 

Vehicles

 

89,000

 

7 years

 

Equipment

 

318,700

 

3-16 years

 

Furniture and fixtures

 

4,600

 

5 years

 

Construction in progress

 

42,967

 

15 years

 

Property, plant and equipment adjustment

 

$

634,267

 

 

 

 

10



 

Clean Harbors has recorded a noncurrent deferred tax liability related to the preliminary fair value adjustment of approximately $122.1 million in unrecognized tax benefits and other long-term liabilities based on a 35% statutory tax rate.

 

f)                                      Represents an adjustment of $389.3 million to reflect the step-up to the preliminary estimated fair value of Safety-Kleen’s identifiable intangible assets from the respective carrying values reported by Safety-Kleen as of September 30, 2012 using a combination of the cost and market approach and the income approach. The identifiable intangible assets primarily consist of trademarks and trade names, supplier relationships, customer relationships and permits. The estimated intangible assets are expected to be amortized on a straight-line basis over estimated useful lives that will range from 10 to 30 years, subject to the finalization of the purchase price allocation. The pro forma adjustment for permits and other intangible assets consists of the following (in thousands):

 

Permits and other intangible assets (i)

 

$

456,900

 

Less: Safety-Kleen’s net book value

 

(83,369

)

Plus: Safety-Kleen’s software reclassification

 

15,734

 

Pro forma permits and other intangible assets adjustment

 

$

389,265

 

 


(i)

 

 

 

 

 

 

 

Acquisition Pro Forma

 

Estimated Useful Life

 

Trademarks and trade names

 

$

113,800

 

Indefinite

 

Customer relationships - Oil Re-refining

 

99,200

 

20 years

 

Customer relationships - Environmental services

 

70,200

 

11 years

 

Supplier relationships - Re-refining

 

100,200

 

10 years

 

Supplier relationships - Recycled fuel oil

 

36,200

 

10 years

 

Permits - Environmental services

 

25,800

 

30 years

 

Permits - Oil Re-refining

 

11,500

 

30 years

 

Permits and other intangible assets adjustment

 

$

456,900

 

 

 

 

Clean Harbors has recorded a noncurrent deferred tax liability related to the preliminary fair value adjustment of approximately $136.2 million in unrecognized tax benefits and other long-term liabilities based on a 35% statutory tax rate.

 

g)                                      Represents an adjustment to record new deferred financing fees of approximately $10.6 million in connection with the Notes Offering.

 

h)                                     Represents an adjustment to reduce accounts receivable and accounts payable for intercompany transactions between Clean Harbors and Safety-Kleen of approximately $2.0 million.

 

i)                                         Represents an adjustment to record goodwill. We have preliminarily allocated the purchase price to net tangible and intangible assets based upon their estimated fair values as of September 30, 2012. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets has been recorded as goodwill (in thousands):

 

 

 

Increase
(Decrease)

 

Record acquisition goodwill

 

$

312,540

 

Eliminate existing Safety-Kleen goodwill

 

(36,787

)

 

 

$

275,753

 

 

j)                                        Represents an adjustment of approximately $4.5 million to record direct transaction costs, which consist of legal and accounting fees and other external costs directly related to the Merger incurred by Clean Harbors.

 

11



 

k)                                     Represents an adjustment to reflect the extinguishment of Safety-Kleen’s existing outstanding debt of $223.1 million (including current portion) and record the estimated gross proceeds of $600.0 million from the Notes Offering.

 

l)                                         Represents adjustments to eliminate Safety-Kleen’s historical stockholders’ equity of $305.9 million; record the issuance and $368.5 million net proceeds from the sale of 6.9 million new Clean Harbors’ common stock ($0.01 par value) in the Stock Offering; and reduce accumulated earnings for approximately $4.5 million of legal and accounting fees incurred by Clean Harbors related to the acquisition of Safety-Kleen and $5.2 million of commitment fees related to certain backup financing we obtained in connection with the Merger from certain affiliates of the initial purchasers in the Notes Offering as follows (in thousands).

 

 

 

Pro forma Adjustments

 

 

 

Safety-Kleen
balances as of
September 30,
2012

 

Acquisition
Fees

 

Acquisition
Pro Forma
Adjustments

 

Proceeds
from Stock
Offering

 

Notes
Offering
Commitment
fees

 

Stock
Offering Pro
Forma
Adjustments

 

Clean Harbors authorized 80,000,000; pro forma shares issued and outstanding 60,286,280

 

$

(509

)

$

 

$

(509

)

$

69

 

$

 

$

69

 

Additional paid-in capital

 

(390,560

)

 

(390,560

)

368,409

 

 

368,409

 

Accumulated other comprehensive income

 

(4,675

)

 

(4,675

)

 

 

 

 

Accumulated earnings (deficit)

 

89,881

 

(4,449

)

85,432

 

 

 

(5,188

)

(5,188

)

Total

 

$

(305,863

)

$

(4,449

)

$

(310,312

)

$

368,478

 

$

(5,188

)

$

363,290

 

 

4.                                      Pro Forma Statement of Income Adjustments

 

The unaudited pro forma condensed combined statements of income do not include any non-recurring charges that will arise as a result of the Merger described above.

 

m)                                 Represents an adjustment of approximately $13.0 million and $8.5 million to reduce revenues and cost of revenues for intercompany transactions between Clean Harbors and Safety-Kleen for the year ended December 31, 2011 and the nine months ended September 30, 2012, respectively.

 

n)                                     Represents reclassifications to conform to Clean Harbors’ presentation, as follows (in thousands):

 

 

 

Increase
(Decrease)

 

Year ended December 31, 2011

 

 

 

Costs of revenue

 

$

(2,169

)

Accretion of environmental liabilities

 

2,169

 

 

 

 

 

Costs of revenue

 

$

(49,610

)

Selling, general and administrative

 

49,610

 

 

 

 

 

Nine months ended September 30, 2012

 

 

 

Costs of revenue

 

$

(1,888

)

Accretion of environmental liabilities

 

1,888

 

 

 

 

 

Costs of revenue

 

$

(38,628

)

Selling, general and administrative

 

38,628

 

 

o)                                     Represents the corresponding adjustment of $17.6 million and $13.9 million to depreciation and amortization expense for the step-up in property, plant and equipment and identifiable intangibles to the preliminary estimated fair value for the year ended December 31, 2011 and the nine months ended September 30, 2012, respectively.  The step-up adjustments were calculated based on using the straight-line method over the estimated useful lives discussed in notes 3(e) and 3(f).

 

12



 

The pro forma depreciation and amortization adjustments are as follows (in thousands):

 

 

 

Year Ended
December 31, 2011

 

Nine Months Ended
September 30, 2012

 

Eliminate Safety-Kleen’s depreciation and amortization

 

$

(66,808

)

$

(49,436

)

Permits and intangible assets amortization

 

26,225

 

19,669

 

Property, plant and equipment depreciation

 

58,163

 

43,622

 

Pro forma depreciation and amortization adjustment

 

$

17,580

 

$

13,855

 

 

With other assumptions held constant, a 10% increase in the fair value of property, plant and equipment and intangible assets as calculated would increase annual pro forma depreciation and amortization expense by approximately $8.4 million and $6.3 million for the year ended December 31, 2011 and the nine months ended September 30, 2012, respectively. With other assumptions held constant, a 10% decrease in the estimated remaining useful lives of property, plant and equipment and amortizable intangible assets would increase pro forma depreciation and amortization by approximately $9.4 million and $7.0 million for the year ended December 31, 2011 and the nine months ended September 30, 2012, respectively. The increases in pro forma depreciation and amortization are as follows (in thousands):

 

 

 

 

 

 

 

Increase in Pro Forma Depreciation and Amortization

 

 

 

Acquisition

 

10%

 

10% Increase in the
Fair Value

 

10% Decrease in the
Estimated Remaining
Useful Life

 

 

 

Pro Forma
Adjustment

 

Increase in
Fair Value

 

Twelve
Months

 

Nine
Months

 

Twelve
Months

 

Nine
Months

 

Property, Plant and Equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

Buildings and building improvements

 

$

140,000

 

$

154,000

 

$

583

 

$

438

 

$

648

 

$

486

 

Land and leasehold improvements

 

39,000

 

42,900

 

406

 

305

 

450

 

338

 

Vehicles

 

89,000

 

97,900

 

1,271

 

954

 

1,413

 

1,060

 

Equipment

 

318,700

 

350,570

 

3,182

 

2,384

 

3,535

 

2,650

 

Furniture and fixtures

 

4,600

 

5,060

 

92

 

69

 

102

 

77

 

Construction in progress

 

42,967

 

47,264

 

282

 

212

 

314

 

235

 

Property, plant and equipment adjustment

 

$

634,267

 

$

697,694

 

$

5,816

 

$

4,362

 

$

6,462

 

$

4,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Permits and Intangible Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademarks and trade names

 

$

113,800

 

$

125,180

 

$

 

$

 

$

 

$

 

Customer relationships - Oil Re-refining

 

99,200

 

109,120

 

496

 

372

 

551

 

413

 

Customer relationships - Environmental services

 

70,200

 

77,220

 

638

 

479

 

709

 

532

 

Supplier relationships - Re-refining

 

100,200

 

110,220

 

1,002

 

752

 

1,113

 

835

 

Supplier relationships - Recycled fuel oil

 

36,200

 

39,820

 

362

 

272

 

402

 

302

 

Permits - Environmental services

 

25,800

 

28,380

 

86

 

65

 

96

 

72

 

Permits - Oil Re-refining

 

11,500

 

12,650

 

38

 

29

 

43

 

32

 

Permits and other intangible assets adjustment

 

$

456,900

 

$

502,590

 

$

2,623

 

$

1,967

 

$

2,914

 

$

2,186

 

Total

 

$

1,091,167

 

$

1,200,284

 

$

8,439

 

$

6,329

 

$

9,376

 

$

7,032

 

 

p)                                     Represents the corresponding amortization of the inventory step-up into cost of revenues of $14.7 million as if the acquisition had been completed on January 1, 2011.

 

13



 

q)                                     Represents adjustments to interest expense related to completion of the Notes Offering at an interest rate of 5.125% (including amortization of funding expense) offset by the reversal of Safety-Kleen’s interest expense for outstanding debt net of the outstanding letters of credit.

 

 

 

Year Ended December 31, 2011

 

Nine Months Ended September 30, 2012

 

 

 

Acquisition Pro
forma
Adjustments

 

Stock and Notes
Offerings Pro
Forma
Adjustments

 

Acquisition Pro
forma
Adjustments

 

Stock and Notes
Offerings Pro
Forma
Adjustments

 

Interest on $600 million debt

 

$

 

$

(30,750

)

$

 

$

(23,062

)

Estimated amortization of financing costs

 

 

(1,242

)

 

(932

)

Elimination of Safety-Kleen interest expense, net

 

8,897

 

 

8,980

 

 

Pro forma interest expense adjustment

 

$

8,897

 

$

(31,992

)

$

8,980

 

$

(23,994

)

 

r)                                        Represents the pro forma tax effect of the above adjustments at an estimated statutory tax rate of 35.0% for the year ended December 31, 2011 and the nine months ended September 30, 2012.  The pro forma income tax provision adjustment is as follows (in thousands):

 

 

 

Year Ended December 31, 2011

 

Nine Months Ended September 30, 2012

 

 

 

Acquisition Pro
forma Adjustments

 

Stock and
Notes
Offerings Pro
Forma
Adjustments

 

Acquisition Pro
forma
Adjustments

 

Stock and Notes
Offerings Pro Forma
Adjustments

 

Pro forma loss before income taxes

 

$

(23,419

)

$

(31,992

)

$

(4,876

)

$

(23,994

)

Statutory income tax rate

 

35

%

35

%

35

%

35

%

Pro forma income tax provision adjustment

 

$

(8,197

)

$

(11,197

)

$

(1,706

)

$

(8,398

)

 

At the end of Safety-Kleen’s fiscal year 2011, Safety-Kleen determined that it is more likely than not that the U.S. operations would realize its loss carryforwards and other deferred tax assets and released the valuation allowance recorded against its U.S. deferred tax assets of $103.2 million.

 

s)                                      For the nine months ended September 30, 2012, the dilutive effect of all then outstanding options, restricted stock and performance awards is included in the earnings per share calculation except for 66,000 Clean Harbors outstanding performance stock awards for which the performance criteria were not attained at that time. For the year ended December 31, 2011, there were no anti-dilutive awards.

 

14



 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to its current report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Clean Harbors, Inc.

 

(Registrant)

 

 

 

 

March 8, 2013

/s/ James M. Rutledge

 

Vice Chairman, President and

 

Chief Financial Officer

 

15