Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - CLEAN HARBORS INC | ex991_5418.htm |
| EX-23.2 - EXHIBIT 23.2 - CLEAN HARBORS INC | ex232.htm |
| 8-K/A - 8-K/A - CLEAN HARBORS INC | form8-ka.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On January 17, 2018, Clean Harbors, Inc. (the “Company”) entered into a purchase agreement with Veolia Environmental Services North America LLC (“Seller”) to acquire Seller’s U.S. Industrial Cleaning Business (the “Veolia Business”) for a purchase price (subject to certain working capital and other adjustments) of $120 million in cash. The acquisition subsequently closed on February 23, 2018.
The unaudited pro forma condensed combined balance sheet as of December 31, 2017 gives effect to the acquisition as if it closed on December 31, 2017 and combines the historical balance sheets of the Company and the Veolia Business as of December 31, 2017. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 is presented as if the acquisition was consummated on January 1, 2017, and combines the historical results of the Company and the Veolia Business for the year ended December 31, 2017. The Veolia Business’s consolidated balance sheet and statement of operations information was derived from audited consolidated financial statements as of and for the year ended December 31, 2017 included as Exhibit 99.1 to this Amendment No. 1 to the Current Report on Form 8-K. The Company’s consolidated balance sheet and statement of operations information was derived from its audited financial statements as of and for the year ended December 31, 2017 included in its Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on February 28, 2018, or the Company’s 10-K. The historical consolidated financial information has been adjusted in the pro forma financial statements to give effect to pro forma events that are: (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) expected to have a continuing impact on the combined results of the Company and the Veolia Business. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information.
The following unaudited pro forma condensed combined financial information gives effect to the acquisition using the acquisition method of accounting. Under the acquisition method of accounting, the purchase price is allocated to the Veolia Business’s tangible and intangible assets acquired and liabilities assumed based on the respective fair value with any excess purchase price allocated to goodwill. The information reflects the Company’s preliminary estimates of the allocation of the purchase price for the Veolia Business based upon available information and certain assumptions that management believes are reasonable under the circumstances, and actual results could differ materially from these anticipated results. The final allocation of the purchase price will be based on the final purchase price, as it may be adjusted in accordance with the acquisition agreement, and the finalization of the fair value determinations related to the Veolia Business’s tangible and identifiable intangible assets acquired and liabilities assumed.
The following unaudited pro forma condensed combined financial information does not purport to represent what the Company’s results of operations or financial position would actually have been had the acquisition occurred on the dates described above or to project the Company’s results of operations or financial position for any future date or period. The combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of the Veolia Business as a result of integration activities and other cost savings initiatives. The Company currently estimates that synergies and other cost savings initiatives will result in annual combined cost savings of approximately $22 million to $27 million as compared to amounts reflected in the 2017 results relating to the Veolia Business and the pro forma combined amounts. Synergies are expected from reduced costs associated with finance, tax, information technology, legal, risk management and other administrative services utilizing the Company’s structure, and incremental cost savings from lease buyouts, previous restructuring actions and workforce integration, which are not reflected in the pro forma condensed consolidated statements of operations. Although the Company believes such cost savings and other synergies will be realized following the business combination, there can be no assurance that these cost savings or any other synergies will be achieved in full or at all.
The following unaudited pro forma condensed combined financial information and the accompanying notes should be read together with (1) the Company’s audited consolidated financial statements and accompanying notes, as of and for the fiscal year ended December 31, 2017, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and (2) the Veolia Business’s audited consolidated financial statements as of and for the year ended December 31, 2017 included as Exhibit 99.1 to this Amendment No. 1 to the Current Report on Form 8-K.
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CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
ASSETS
AS AT DECEMBER 31, 2017
(in thousands)
Clean Harbors | Veolia Business | Pro Forma Adjustments | Notes | Pro Forma | ||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 319,399 | $ | — | $ | (120,000 | ) | (a) | $ | 199,399 | ||||||||
Marketable securities | 38,179 | — | — | 38,179 | ||||||||||||||
Accounts receivable, net | 528,924 | 20,112 | (17 | ) | (b) | 549,019 | ||||||||||||
Unbilled accounts receivable | 35,922 | 17,418 | — | 53,340 | ||||||||||||||
Due from affiliates | — | 3,389 | — | (c) | 3,389 | |||||||||||||
Deferred costs | 20,445 | — | — | 20,445 | ||||||||||||||
Prepaid expenses and other current assets | 35,175 | 1,485 | — | 36,660 | ||||||||||||||
Inventories and supplies | 176,012 | 1,459 | — | 177,471 | ||||||||||||||
Total current assets | 1,154,056 | 43,863 | (120,017 | ) | 1,077,902 | |||||||||||||
Property, plant and equipment, net | 1,587,365 | 36,454 | 35,566 | (d) | 1,659,385 | |||||||||||||
Other assets: | ||||||||||||||||||
Goodwill | 478,523 | 26,569 | 41 | (e) | 505,133 | |||||||||||||
Permits and other intangibles, net | 469,128 | — | 5,140 | (f) | 474,268 | |||||||||||||
Other | 17,498 | 168 | — | 17,666 | ||||||||||||||
Total other assets | 965,149 | 26,737 | 5,181 | 997,067 | ||||||||||||||
Total assets | $ | 3,706,570 | $ | 107,054 | $ | (79,270 | ) | $ | 3,734,354 | |||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
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CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS’ EQUITY
AS AT DECEMBER 31, 2017
(in thousands)
Clean Harbors | Veolia Business | Pro Forma Adjustments | Notes | Pro Forma | ||||||||||||||
Current liabilities: | ||||||||||||||||||
Current portion of long-term debt | $ | 4,000 | $ | — | $ | — | $ | 4,000 | ||||||||||
Accounts payable | 224,231 | 16,403 | — | 240,634 | ||||||||||||||
Deferred revenue | 67,822 | — | — | 67,822 | ||||||||||||||
Accrued expenses | 187,982 | 9,334 | 517 | (g) | 197,833 | |||||||||||||
Due to affiliates | — | 196 | — | (c) | 196 | |||||||||||||
Current portion of closure, post-closure and remedial liabilities | 19,782 | — | — | 19,782 | ||||||||||||||
Total current liabilities | 503,817 | 25,933 | 517 | 530,267 | ||||||||||||||
Other liabilities: | ||||||||||||||||||
Closure and post-closure liabilities, less current portion | 54,593 | — | — | 54,593 | ||||||||||||||
Remedial liabilities, less current portion | 111,130 | — | — | 111,130 | ||||||||||||||
Long-term obligations, less current maturities | 1,625,537 | — | — | 1,625,537 | ||||||||||||||
Deferred taxes, unrecognized tax benefits and other long-term liabilities | 223,291 | 1,868 | — | 225,159 | ||||||||||||||
Total other liabilities | 2,014,551 | 1,868 | — | 2,016,419 | ||||||||||||||
Stockholders’ equity: | ||||||||||||||||||
Common stock, $.01 par value: | ||||||||||||||||||
Clean Harbors authorized 80,000,000; shares issued and outstanding 56,501,190 | 565 | 1 | (1 | ) | (h) | 565 | ||||||||||||
Additional paid-in capital | 686,962 | 228,463 | (228,463 | ) | (h) | 686,962 | ||||||||||||
Accumulated other comprehensive loss | (172,407 | ) | — | — | (h) | (172,407 | ) | |||||||||||
Due from affiliate | — | (29,238 | ) | 29,238 | — | |||||||||||||
Accumulated earnings (deficit) | 673,082 | (119,973 | ) | 119,439 | (h) | 672,548 | ||||||||||||
Total stockholders’ equity | 1,188,202 | 79,253 | (79,787 | ) | 1,187,668 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 3,706,570 | $ | 107,054 | $ | (79,270 | ) | $ | 3,734,354 | |||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
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CLEAN HARBORS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
(in thousands)
Clean Harbors | Veolia Business | Pro Forma Adjustments | Notes | Pro Forma | ||||||||||||||
Revenues: | ||||||||||||||||||
Service revenues | $ | 2,398,650 | $ | 210,157 | $ | (125 | ) | (i) | $ | 2,608,682 | ||||||||
Product revenues | 546,328 | — | — | 546,328 | ||||||||||||||
Total revenues | 2,944,978 | 210,157 | (125 | ) | 3,155,010 | |||||||||||||
Costs of revenues (exclusive of items shown separately below) | ||||||||||||||||||
Service revenues | 1,641,798 | 186,464 | (114 | ) | (i) | 1,828,148 | ||||||||||||
Product revenues | 420,875 | — | — | 420,875 | ||||||||||||||
Total cost of revenues | 2,062,673 | 186,464 | (114 | ) | 2,249,023 | |||||||||||||
Selling, general and administrative expenses | 456,648 | 31,561 | (130 | ) | (j) | 488,079 | ||||||||||||
Restructuring costs | — | 2,089 | — | 2,089 | ||||||||||||||
Accretion of environmental liabilities | 9,460 | — | — | 9,460 | ||||||||||||||
Depreciation and amortization | 288,422 | 9,734 | 6,879 | (k) | 305,035 | |||||||||||||
Income (loss) from operations | 127,775 | (19,691 | ) | (6,760 | ) | 101,324 | ||||||||||||
Other expense | (6,119 | ) | (182 | ) | — | (6,301 | ) | |||||||||||
Loss on early extinguishment of debt | (7,891 | ) | — | — | (7,891 | ) | ||||||||||||
Gain on sale of business | 30,732 | — | — | 30,732 | ||||||||||||||
Interest expense, net | (85,808 | ) | (2,588 | ) | — | (88,396 | ) | |||||||||||
Income (loss) before benefit for income taxes | 58,689 | (22,461 | ) | (6,760 | ) | 29,468 | ||||||||||||
Benefit for income taxes | (42,050 | ) | (477 | ) | (2,366 | ) | (l) | (44,893 | ) | |||||||||
Net income (loss) | $ | 100,739 | $ | (21,984 | ) | $ | (4,394 | ) | $ | 74,361 | ||||||||
Earnings per Share: | ||||||||||||||||||
Basic | $ | 1.77 | $ | 1.30 | ||||||||||||||
Diluted | $ | 1.76 | $ | 1.30 | ||||||||||||||
Shares used to compute earnings per share - Basic | 57,072 | 57,072 | ||||||||||||||||
Shares used to compute earnings per share - Diluted | 57,200 | 57,200 | ||||||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. | The Acquisition |
On January 17, 2018, Clean Harbors, Inc. (the “Company”) entered into a purchase agreement with Veolia Environmental Services North America, LLC (“Seller”) to acquire Seller’s U.S. Industrial Cleaning Business (the “Veolia Business”). The acquisition subsequently closed on February 23, 2018.
Under the terms of the purchase agreement, the Company agreed to pay to the Veolia Business’s shareholder cash consideration in an amount equal to $120.0 million, subject to working capital adjustments, which are to be settled within 120 days from closing.
The following summarizes the preliminary purchase price allocation, as if the acquisition had occurred on December 31, 2017 (in thousands):
Assets to be acquired: | |||
Accounts receivable | $ | 20,112 | |
Unbilled accounts receivable | 17,418 | ||
Prepaid expenses and other current assets | 4,874 | ||
Inventory | 1,459 | ||
Goodwill | 26,610 | ||
Intangible assets | 5,140 | ||
Property, plant and equipment | 72,020 | ||
Other assets | 168 | ||
147,801 | |||
Liabilities to be assumed: | |||
Accounts payable | 16,403 | ||
Accrued expenses | 9,530 | ||
Deferred tax liabilities, net | 1,868 | ||
27,801 | |||
Net assets to be acquired | $ | 120,000 | |
The Company has determined initial allocation estimates based on preliminary valuations of property, plant and equipment, customer relationships and other potential intangible assets. The valuations consist of discounted cash flow analysis or other appropriate valuation techniques to determine the fair value of the assets acquired and liabilities assumed. The Company will make a Section 338(g) election under the Internal Revenue Code with respect to this acquisition, resulting in the acquired entity being treated as an asset purchase for tax purposes. Therefore, no deferred tax liabilities are reflected related to the preliminary fair value adjustments. Based on information available at the time of the filing of this current report on Form 8-K/A, the Company is not aware of any differences in accounting policies that would have a material impact on the financial results of the combined company.
The amounts allocated to assets to be acquired and liabilities to be assumed in the acquisition could differ materially from the preliminary allocation estimates. Decreases or increases in the fair value of assets acquired or liabilities assumed in the acquisition from those preliminary valuations presented would result in a corresponding increase or decrease in the amount of goodwill that resulted from the acquisition. 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 statement of operations.
2. | 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 to pay the purchase price for the Veolia Business. |
b) | Represents an adjustment to reduce accounts receivable for sales transactions between the Company and the Veolia Business that occurred prior to the completion of the acquisition. |
c) | Due to/Due from affiliates balances represent amounts that the Veolia Business either owed or expected to receive from its parent company and/or affiliates for transactions that occurred prior to December 31, 2017. As of the |
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closing of the acquisition on February 23, 2018, these receivables and payables were settled with the Veolia Business’s parent company and/or affiliates.
d) | Represents a preliminary adjustment of $35.6 million to adjust the carrying value of the acquired property, plant and equipment as of December 31, 2017 to estimated fair value 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 four to 15 years. The pro forma adjustment for property, plant and equipment consisted of the following (in thousands): |
Property, plant and equipment (i) | $ | 69,804 | |
Land | 2,216 | ||
Less: Veolia Business’s net book value | (36,454 | ) | |
Pro forma property, plant and equipment adjustment | $ | 35,566 | |
(i) | Acquisition Date Fair Value | Estimated Useful Life | |||
Buildings and building improvements | $ | 6,326 | 12 years | ||
Transportation equipment | 47,089 | 6 years | |||
Machinery and equipment | 15,821 | 5 years | |||
Furniture and fixtures | 57 | 4 years | |||
Construction in progress | 511 | 15 years | |||
Property, plant and equipment | $ | 69,804 | |||
e) | Represents an adjustment to record preliminary goodwill. 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 | $ | 26,610 | |
Eliminate the Veolia Business’s existing goodwill | (26,569 | ) | |
Goodwill adjustment | $ | 41 | |
f) | Represents an adjustment of $5.1 million to reflect the preliminary estimated fair value of the Veolia Business’s identifiable intangible assets using a combination of the cost and market approach and the income approach. The identifiable intangible assets primarily consist of customer relationships and a corporate non-compete agreement. The estimated intangible assets are expected to be amortized on a straight-line basis over estimated useful lives that will range from five to 10 years. The pro forma adjustment for permits and other intangible assets consists of the following (in thousands): |
Acquisition Pro Forma | Estimated Useful Life | ||||
Customer relationships | $ | 3,300 | 10 years | ||
Non-compete agreement | 1,840 | 5 years | |||
Permits and other intangible assets adjustment | $ | 5,140 | |||
g) | Represents an adjustment of approximately $0.5 million to record direct transaction costs, which consist of legal and accounting fees and other external costs incurred by the Company. |
h) | Represents adjustments to eliminate the Veolia Business’s historical stockholders’ equity of $79.3 million; and reduce accumulated earnings for approximately $0.5 million of legal and accounting fees incurred by the Company related to the acquisition of the Veolia Business and the elimination of accounts receivable for sales transactions between the Company and the Veolia Business. |
3. | Pro Forma Statement of Operations Adjustments |
The unaudited pro forma condensed combined statements of operations do not include any non-recurring charges that will arise as a result of the acquisition described above.
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i) | Represents an adjustment to reduce revenue and cost of revenue for transactions between the Company and the Veolia Business for the year ended December 31, 2017. |
j) | Represents the elimination of costs incurred in relation to the acquisition that are non-recurring. |
k) | Represents the corresponding adjustment of $6.9 million to annual depreciation and amortization expense for the step-up in property, plant and equipment and identifiable intangibles to the preliminary estimated fair value. The adjustments were calculated using the straight-line method over the estimated useful lives discussed in notes 2(d) and 2(f). |
The pro forma depreciation and amortization adjustments are as follows (in thousands):
Year Ended December 31, 2017 | |||
Eliminate the Veolia Business’s depreciation and amortization | $ | (9,734 | ) |
Permits and intangible assets amortization | 698 | ||
Property, plant and equipment depreciation | 15,915 | ||
Pro forma depreciation and amortization adjustment | $ | 6,879 | |
l) | 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, 2017. The pro forma income tax provision adjustment is as follows (in thousands): |
Acquisition Pro forma Adjustments | |||
Pro forma loss before income taxes | $ | (6,760 | ) |
Statutory income tax rate | 35 | % | |
Pro forma income tax provision adjustment | $ | (2,366 | ) |
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