1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
for the Quarterly Period Ended
September 30, 1997
-----------------------
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 02185-0327
(Address of Principal Executive Offices) (Zip Code)
(781) 849-1800 ext. 4454
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value 10,101,490
- ---------------------------- --------------------------------
(Class) (Outstanding at November 5, 1997)
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CLEAN HARBORS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS PAGES
Consolidated Statements of Income 1
Consolidated Balance Sheets 2-3
Consolidated Statements of Cash Flows 4-5
Consolidated Statement of Stockholders' Equity 6
Notes to Consolidated Financial Statements 7-8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-13
PART II: OTHER INFORMATION
Items No. 1 through 6 14
Signatures 15
3
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(in thousands except for earnings per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- -----------------------
1997 1996 1997 1996
--------------------- -----------------------
Revenues $50,137 $50,738 $137,874 $146,112
Cost of revenues 37,650 39,515 104,023 113,333
Selling, general and
administrative expenses 8,884 8,768 25,714 27,248
Depreciation and amortization 2,274 2,416 6,983 7,432
------- ------- -------- --------
Income (loss) from operations 1,329 39 1,154 (1,901)
Other income (net) -- -- 800 --
Interest expense, net 2,350 2,362 6,923 6,870
------- ------- -------- --------
Loss before benefit from
income taxes (1,021) (2,323) (4,969) (8,771)
Benefit from income taxes (235) (581) (1,317) (2,782)
------- ------- -------- --------
Net loss $ (786) $(1,742) $ (3,652) $ (5,989)
======= ======= ======== ========
Net loss per common and
common equivalent share $ (.09) $ (.19) $ (.40) $ (.66)
======= ======= ======== ========
Weighted average common and
common equivalent shares
outstanding 10,009 9,685 9,913 9,623
======= ======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
(1)
4
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
SEPTEMBER 30, DECEMBER 31,
1997 1996
(Unaudited)
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,247 $ 1,366
Restricted investments 917 8,190
Accounts receivable, net of
allowance for doubtful accounts 42,991 42,746
Prepaid expenses 1,615 1,603
Supplies inventories 2,863 2,866
Income tax receivable 1,816 1,668
Deferred tax asset 2,507 3,152
-------- --------
Total current assets 55,956 61,591
Property, plant and equipment:
Land 8,182 8,423
Buildings and improvements 37,405 39,585
Vehicles and equipment 77,045 78,050
Furniture and fixtures 2,189 2,191
Construction in progress 2,902 1,819
-------- --------
127,723 130,068
Less - Accumulated depreciation
and amortization 64,919 61,282
-------- --------
Net property, plant and equipment 62,804 68,786
-------- --------
Other assets:
Goodwill, net 20,936 21,479
Permits, net 11,923 12,605
Deferred taxes non-current 11,099 9,208
Other 4,532 4,328
-------- --------
Total other assets 48,490 47,620
-------- --------
Total assets $167,250 $177,997
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
(2)
5
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
SEPTEMBER 30, DECEMBER 31,
1997 1996
(Unaudited)
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations $ 4,077 $ 4,370
Accounts payable 16,483 20,069
Accrued disposal costs 6,895 7,912
Other accrued expenses 12,476 14,609
Income tax payable -- 162
Deferred tax liability 223 224
--------- ---------
Total current liabilities 40,154 47,346
--------- ---------
Long-term obligations, less current maturities 68,419 68,668
Deferred taxes, long-term 7,301 7,453
Other 1,277 946
--------- ---------
Total other liabilities 76,997 77,067
--------- ---------
Stockholders' equity:
Preferred Stock, $.01 par value:
Series A Convertible;
Authorized-2,000,000 shares; Issued and -- --
outstanding - none
Series B Convertible; Authorized-156,416
shares; Issued and outstanding 112,000
shares at September 30, 1997 and
December 31, 1996 (liquidation
preference of $5.6 million) 1 1
Common Stock, $.01 par value Authorized -
20,000,000 shares; Issued and
outstanding - 10,020,825 shares at
September 30, 1997 and 9,743,153
shares at December 31, 1996 100 98
Additional paid-in capital 59,944 59,477
Unrealized gain (loss) on restricted
investments, net of tax 19 (15)
Accumulated deficit (9,965) (5,977)
--------- ---------
Total stockholders' equity 50,099 53,584
--------- ---------
Total liabilities and stockholders' equity $ 167,250 $ 177,997
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
(3)
6
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
NINE MONTHS ENDING
SEPTEMBER 30,
---------------------
1997 1996
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,652) $(5,989)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 6,983 7,432
Deferred taxes (1,399) (2,004)
Allowance for doubtful accounts 495 480
Amortization of deferred financing costs 551 477
Loss (Gain) on sale of fixed assets 139 (33)
Changes in assets and liabilities:
Accounts receivable (740) 4,537
Refundable income taxes (148) (1,778)
Prepaid expenses (12) (342)
Supplies inventories 3 76
Accounts payable (3,586) 1,079
Accrued disposal costs (1,017) 88
Other accrued expenses (1,482) (4,461)
Income taxes payable (162) 47
Other liabilities 331 --
------- -------
Net cash used in operating activities (3,696) (391)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (2,583) (2,467)
Additions to permits -- (13)
Proceeds from sale and maturities of restricted
investments 7,307 730
Cost of restricted investments acquired -- (1,181)
Increase in other assets -- (977)
Proceeds from sales of fixed assets 1,814 919
------- -------
Net cash (used in) provided by
investing activities 6,538 (2,989)
------- -------
The accompanying notes are an integral part of these consolidated financial
statements.
(4)
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CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Unaudited
(in thousands)
NINE MONTHS ENDING
SEPTEMBER 30,
---------------------
1997 1996
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt
(excluding the long-term revolver) -- 16,667
Net borrowings (repayments) under
long-term revolver 2,200 (7,130)
Payments on long-term obligations (3,232) (5,458)
Additions to deferred financing costs (61) (487)
Proceeds from stock issuance 132 113
------- -------
Net cash (used in) provided by
financing activities (961) 3,705
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 1,881 325
Cash and equivalents, beginning of year 1,366 225
------- -------
Cash and equivalents, end of period $ 3,247 $ 550
======= =======
Supplemental Information:
Non cash investing and financing activities:
Stock dividend on preferred stock $ 336 $ 336
The accompanying notes are an integral part of these consolidated financial
statements.
(5)
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CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Unaudited
(in thousands)
Series B
Preferred Stock Common Stock
--------------- --------------- Unrealized
Number $.01 Number $.01 Additional Gain (Loss) on Total
of Par of Par Paid-In Restricted Accumulated Stockholders'
Shares Value Shares Value Capital Investments Deficit Equity
------ ----- ------ ----- ---------- -------------- ----------- ------------
Balance at
December 31, 1996 112 $ 1 9,743 $ 98 $59,477 $ (15) $(5,977) $53,584
Preferred stock dividends:
Series B -- -- 194 2 334 -- (336) --
Proceeds from exercise of
options -- -- 9 -- 19 -- -- 19
Tax benefit from exercise
of options -- -- -- -- 1 -- -- 1
Employee stock purchase
plan -- -- 75 -- 113 -- -- 113
Change in restricted
investments, net of tax -- -- -- -- -- 34 -- 34
Net loss -- -- -- -- -- -- (3,652) (3,652)
--- --- ------ ---- ------- ---- ------- -------
Balance at
September 30, 1997 112 $ 1 10,021 $100 $59,944 $ 19 $(9,965) $50,099
=== === ====== ==== ======= ==== ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
(6)
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CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 BASIS OF PRESENTATION
The consolidated interim financial statements included herein have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission, and include, in the opinion of management, all
adjustments (consisting of only normal recurring accruals) necessary for the
fair presentation of interim period results. The operating results for the nine
months ended September 30, 1997 are not necessarily indicative of those to be
expected for the full fiscal year. Reference is made to the audited consolidated
financial statements and notes thereto included in the Company's Report on Form
10-K for the year ended December 31, 1996 as filed with the Securities and
Exchange Commission. The year end condensed balance sheet data was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
NET LOSS PER COMMON SHARE
Net loss per common share is based on net loss less preferred stock
dividend requirements divided by the weighted average number of common shares
outstanding during each of the respective periods. Fully diluted net loss per
common share has not been presented as the amount would not differ significantly
from that presented.
The Financial Accounting Standards Board issued Statement No. 128 ("SFAS
128"), "Earnings per Share", which requires the presentation of basic and
diluted earning per share ("EPS"). Basic EPS excludes dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS is computed
similarly to fully diluted EPS under the existing rules. The Company will adopt
SFAS 128 as of December 31, 1997 and upon adoption, will restate all prior
period EPS data presented. The impact of adopting SFAS 128 is not material.
NOTE 3 FINANCIAL ARRANGEMENTS
As amended, the Company has a $35,000,000 Loan Agreement with a financial
institution. The Loan Agreement provided for a $24,500,000 revolving credit
portion (the "Revolver") and a $10,500,000 term promissory note. The Revolver
allows the Company to borrow up to $35,000,000 in cash and letters of credit,
based on a formula of eligible accounts receivable.
In June 1997 the term of the Revolver was extended from May 8, 1998 to May
8, 1999 under substantially the same terms and conditions. At September 30,
1997, the Revolver balance was $4,416,000, letters of credit outstanding were
$6,309,000 and funds available to borrow were approximately $9,200,000.
(7)
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CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
NOTE 4 CONTINGENCIES
During the ordinary course of its business, the Company is audited by
federal and state tax authorities, which may result in proposed assessments. The
Company received a Notice of Intent to assess state income taxes from one of the
states in which it operates. This case is currently undergoing administrative
appeal. If the Company loses the administrative appeal, the Company may be
required to make a payment of approximately $3 million to the state, and the
intent of the Company would be to pursue the case in State Tax Court. A decision
is expected regarding the administrative appeal within nine months. The Company
believes that it has properly reported its state income and intends to contest
the assessment vigorously. The Company believes that no current audits or
assessments will result in charges which would be material to the result of
operations.
NOTE 5 OTHER INCOME
During the first quarter of 1997, the Company recorded a $950,000
receivable in connection with the settlement of a lawsuit and incurred
approximately $150,000 in costs related to the litigation during the first
quarter. The Company recognized a pre-tax gain, net of related legal fees, of
$800,000 resulting from the settlement, which is included in other income (net),
in the consolidated statement of income. The $950,000 was received in April,
1997.
(8)
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CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES
Revenues for the third quarter of 1997 were $50,137,000, down 1.2% as
compared to revenues of $50,738,000 for the corresponding quarter of the prior
year. Revenues for the first nine months of 1997 were $137,874,000, which was a
5.6% decrease from the revenues for the first nine months of 1996 of
$146,112,000. The revenue decline, for the comparative three and nine month
periods, was due to industry-wide pricing pressures and an absence of event
revenue in the field services business.
There are many factors which have influenced, and continue to influence,
the Company's revenues. These factors include: competitive industry pricing;
continued efforts by generators of hazardous waste to reduce the amount of
hazardous waste they produce; significant consolidation among treatment and
disposal companies; industry-wide over capacity; and direct shipment by
generators of waste to the ultimate treatment or disposal location.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain operating
data associated with the Company's results of operations:
Percentage Of Total Revenues
-------------------------------------------
Three months ended Nine months ended
September 30, September 30,
------------------- -----------------
1997 1996 1997 1996
------ ------ ------ ------
Revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Cost of revenues:
Disposal costs paid to third parties 13.6 14.6 13.3 14.3
Other costs 61.5 63.3 62.1 63.3
------ ------ ------ ------
Total cost of revenues 75.1 77.9 75.4 77.6
Selling, general and administrative
expenses 17.7 17.3 18.7 18.6
Depreciation and amortization
of intangible assets 4.5 4.8 5.1 5.1
Income (loss) from operations 2.7% 0.0% 0.8% (1.3)%
Other Data:
- ----------
Earnings Before Interest, Taxes,
Depreciation and Amortization
(EBITDA) (in thousands) $3,603 $2,455 $8,137 $5,531
(9)
12
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COST OF REVENUES
Cost of revenues decreased $1,865,000 and $9,310,000 from the quarter and
nine months ended September 30, 1997 compared to the quarter and nine months
ended September 30, 1996, respectively. As a percent of revenue, cost of
revenues decreased to 75.1% and 75.4% for the three and nine months ended
September 30, 1997, as compared to 77.9% and 77.6% for the same periods of the
prior year, respectively. One of the largest components of cost of revenues is
the cost of sending waste to other companies for disposal. The Company's outside
disposal costs decreased to 13.3% of revenue in the first nine months of 1997 as
compared to 14.3% of revenue in the first nine months of 1996. The Company has
been able to improve the quality and efficiency of its waste treatment services
through upgrades at its facilities. As a result of these efforts, the Company
has been able to increase the amount of waste processed internally and reduce
its dependency on outside disposal vendors. Other cost of revenues decreased to
61.5% and 62.1% of revenue for the three months and nine months ended September
30, 1997, as compared to 63.3% for both the three months and nine months of the
prior year, respectively. These reductions in other cost of revenues as a
percentage of revenue were due to the implementation of extensive cost reduction
programs.
The Company is continuing to implement cost savings plans to reduce
operating costs. In 1996, the Company implemented its CleanEXPRESStm system
which the Company believes has resulted in increased efficiencies relative to
the transfer of waste materials through the Company's network of waste
management facilities to its expanded and upgraded Chicago facility. The Company
believes this has lowered the costs associated with collecting, transporting,
treating and disposing of hazardous waste.
The Company believes that its ability to manage operating costs is an
important factor in its ability to remain price competitive. During the third
quarter of 1997, the Company continued its process of consolidating common
functions to reduce redundant costs and improve the Company's ability to deliver
its services. No assurance can be given that the Company's efforts to manage
future operating expenses will be successful.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased 1.3% to $8,884,000
for the three months ended September 30, 1997 as compared to $8,768,000 for the
same period of 1996. Selling, general and administrative expenses decreased 5.6%
to $25,714,000 for the nine months ended September 30, 1997 as compared to
$27,248,000 for the same period of 1996. Selling, general and administrative
expenses for the three months ended September 30, 1996 and 1997 contain
adjustments relating to changes in estimates that are not expected to recur.
When these items are taken into account, selling, general and administrative
expenses would have decreased by approximately 1.6% for the three months ended
September 30, 1997, compared to the comparable three month period of the prior
year instead of the 1.3% increase reported. The decrease in general and
administrative expenses for the nine months ended September 30, 1997 compared to
the comparable period of the prior year is due to reductions in administrative
staff and reductions in a number of expenses due to cost savings plans. These
reductions were partially offset by increases in royalty payments to prior
owners of facilities of $380,000, due to increased production at two facilities
for the nine months ended September 30, 1997 as compared to the same period of
the prior year. In addition, the company continues to invest in expanding sales
and
(10)
13
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
marketing capabilities. The increased costs of the royalty payments and the
increased expenses due to sales and marketing have been more than offset by the
cost savings programs.
INTEREST EXPENSE (NET)
Interest expense decreased 0.5% to $2,350,000 for the third quarter of 1997
as compared to $2,362,000 for the corresponding quarter of the prior year.
Interest expense increased 0.8% to $6,923,000 for the first nine months of 1997
as compared to $6,870,000 for the first nine months of the prior year. The
increase in interest expense for the first nine months of 1997 as compared to
the first nine months of 1996 is due primarily to a decrease in interest earned,
which was caused by a significant reduction in the average outstanding balance
of restricted cash.
BENEFIT FROM INCOME TAXES
The effective income tax rate for the three months ended September 30,1997
was (23.0)% as compared to (25.0)% for the comparable period of 1996. The
effective income tax rate for the nine months ended September 30, 1997 and 1996
was (26.5)% and (31.7)%, respectively. The rate can fluctuate significantly
depending on the amount of income before taxes, as compared to the fixed amount
of goodwill amortization, other non-deductible items and changes in estimates.
Realization of the deferred tax assets, which consists primarily of net
operating loss and tax credit carry forwards, is dependent on generating
sufficient taxable income to offset the assets in the foreseeable future.
Although realization is not assured, management believes the deferred tax assets
will be realized due to continued reductions in operating expenses resulting in
taxable income and due to the fact that most of the net operating loss and tax
credit carry forwards will not expire for 12 to 15 years.
During the ordinary course of its business, the Company is audited by
federal and state tax authorities, which may result in proposed assessments. The
Company received a Notice of Intent to assess state income taxes from one of the
states in which it operates. This case is currently undergoing administrative
appeal. If the Company loses the administrative appeal, the Company may be
required to make a payment of approximately $3 million to the state, and the
intent of the Company would be to pursue the case in State Tax Court. A decision
is expected regarding the administrative appeal within the next nine months. The
Company believes that it has properly reported its state income and intends to
contest the assessment vigorously. The Company believes that no current audits
or assessments will result in charges which would be material to the results of
operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
From time to time, the Company and employees acting on behalf of the
Company make forward-looking statements concerning the expected revenues,
results of operations, capital expenditures, capital structure, plans and
objectives of management for future operations, and future economic performance.
This report contains forward-looking statements. There are many factors which
could cause actual results to differ materially from those projected in a
forward-looking statement, and there can be no assurance that such expectations
will be realized.
(11)
14
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's future operating results may be affected by a number of
factors, including the Company's ability to: integrate successfully the
CleanEXPRESStm program; continue to implement the treatment and disposal
reengineering program; utilize its facilities and workforce profitably, in the
face of intense price competition; successfully increase market share in its
existing service territory; integrate additional hazardous waste management
facilities, such as the Kimball incinerator and the expanded Chicago facility;
realize benefits from cost reduction programs; and generate incremental volumes
of waste to be handled through such facilities from existing sales offices and
service centers.
The Company's operations may be affected by the commencement and completion
of major site remediation projects; seasonal fluctuations due to weather and
budgetary cycles influencing the timing of customers' spending for remedial
activities; the timing of regulatory decisions relating to hazardous waste
management projects; changes in the manufacturing sector towards waste
minimization and delays in the remedial market; suspension of governmental
permits; and fines and penalties for noncompliance with the myriad of
regulations governing the Company's diverse operations. As a result of these
factors, the Company's revenue and income could vary significantly from quarter
to quarter, and past financial performance should not be considered a reliable
indicator of future performance.
FINANCIAL CONDITION AND LIQUIDITY
During the nine months ended September 30, 1997, the Company spent
$2,583,000 on additions to plant and equipment and construction in progress, as
compared to its capital expenditures of $2,467,000 during the same period of the
prior year. The capital spending in the first nine months of 1997 was offset by
proceeds from the sale of property, plant and equipment of $1,814,000 in the
first nine months of 1997. During the nine months ended September 30, 1997, net
reductions to long-term debt were $542,000, as compared to net additions to
long-term debt of $4,069,000 during the same period of the previous year.
At December 31, 1996, the Company had a $35,000,000 revolving credit and
term loan agreement (the "Loan Agreement") with a financial institution. The
Loan Agreement provides for a $24,500,000 revolving credit portion (the
"Revolver") and a $10,500,000 term promissory note (the "Term Note"). The Term
Note is payable in 60 monthly installments, commencing April 1, 1996. Monthly
principal payments are $250,000. The Revolver allows increased borrowing
availability to a maximum of $35,000,000 in cash and letters of credit as the
Term Loan is amortized. Letters of credit may not exceed $20,000,000 at any one
time.
The Loan Agreement terms include a borrowing limit, which fluctuates
depending on the level of accounts receivable which collatoralize the Loan
Agreement. The borrowing availability within each month will fluctuate
significantly depending on the level of business activity, when during the month
the bills are sent, the resulting amount of accounts receivable, and the use of
letters of credit. The Loan Agreement terms allow the Company to make regularly
scheduled payments of principal and interest on its other indebtedness for
borrowed money (including leases), to pay dividends in cash on its preferred
stock, to prepay such debt or redeem such preferred stock, and to make
acquisitions of other companies, provided that on each of the sixty consecutive
days prior thereto, and after giving effect thereto, the Company shall maintain
borrowing availability in excess of $4,500,000.
(12)
15
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Although the Company's liquidity may be constrained from time to time due
to borrowing availability, the Company believes it has adequate liquidity for
its ongoing operations and planned capital needs. The Company's operations along
with the provisions of the Loan Agreement are expected to produce cash flow in
excess of the amounts required to finance its operations and its capital
expenditures for the foreseeable future. It is expected that capital
expenditures in 1997 will be approximately $3,000,000.
Dividends on the Company's Series B Convertible Preferred Stock are payable
on the 15th day of January, April, July and October, at the rate of $1.00 per
share, per quarter; 112,000 shares are outstanding. Under the terms of the
preferred stock, the Company can elect to pay dividends in cash or in common
stock with a market value equal to the amount of the dividend payable.
Accordingly, the Company issued 194,239 shares of common stock to the holders of
the preferred stock in the nine month period ended September 30, 1997. The
Company anticipates that the preferred stock dividends payable through 1997 will
be paid in common stock.
During the first quarter of 1997, the Company recorded a $950,000
receivable in connection with the settlement of a lawsuit and incurred
approximately $150,000 in costs related to the litigation during the first
quarter. The $950,000 was received in April, 1997.
(13)
16
CLEAN HARBORS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In October, 1995, an employee at the Company's Cincinnati plant was
accidentally killed when a drum containing waste exploded. The estate of the
deceased employee filed a lawsuit against three subsidiaries of the Company and
two other parties, including the generator of the drum.
The generator of the drum reached a settlement with the estate during the
second quarter of 1997, and subsequent to September 30, 1997, the Company
reached a tentative agreement to settle claims brought by the estate. The
settlement is not material to the financial condition of the Company or to the
results of operations.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR DEBT
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibit 11 - Computation of Net Income per Share.
Exhibit 27 - Financial Data Schedule.
B) Reports on Form 8-K - None
(14)
17
CLEAN HARBORS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Clean Harbors, Inc.
--------------------------------------
Registrant
Dated: November 12, 1997 By: /s/ Alan S. McKim
--------------------------------------
Alan S. McKim
Chairman of the Board and
Chief Executive Officer
Dated: November 12, 1997 By: /s/ Carl Paschetag, Jr.
-------------------------------------
Carl Paschetag, Jr.
Vice President, Treasurer and
Financial Controller
(principal financial and accounting
officer)
(15)