BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

HydroChemPSC

On October 8, 2021, the Company completed its previously announced acquisition of LJ Energy Services Intermediate Holding Corp. and its subsidiaries (collectively, “HydroChemPSC”), a privately owned company. HydroChemPSC is a leading U.S. provider of industrial cleaning, specialty maintenance and utilities services with annual revenues of $715.3 million in 2020. The acquired operations, including more than 4,500 employees, over 240 service locations and a fleet of specialized vehicles and equipment, will enhance the Company's Environmental Services Segment.

The Company paid an all-cash purchase price for HydroChemPSC of approximately $1.23 billion. The Company incurred acquisition, severance and integration related costs of approximately $6.0 million in connection with the transaction which are included in selling, general and administrative expenses in the consolidated statements of operations for the year ended December 31, 2021. The Company financed the purchase with net proceeds from the Company’s issuance of $1.0 billion of senior secured term loans on October 8, 2021. The remainder of the purchase price was funded through existing cash. See Note 11, "Financing Arrangements" for additional information regarding the issuance of the term loans.

The acquisition of HydroChemPSC has been accounted for as a business combination and is included in the Company's consolidated financial statements commencing October 8, 2021. The fair value of all the acquired assets and liabilities summarized below is provisional pending finalization of the Company's acquisition accounting. The Company retained the services of third-party valuation specialists in determining the fair value of certain tangible and intangible assets, under the supervision of management. The Company believes that such preliminary allocations provide a reasonable basis for estimating the fair values of assets acquired and liabilities assumed but the Company is waiting for additional information necessary to finalize fair value. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Final determination of the fair value may result in further adjustments to the amounts presented below. Measurement period adjustment will reflect new information obtained about facts

and circumstances that existed as of the acquisition date. The following table summarizes the preliminary determination and recognition of assets acquired and liabilities assumed (in thousands):


	At October 8, 2021
Accounts receivable, including unbilled receivables	131,924
Inventories and supplies	3,162
Prepaid expenses and other current assets	16,016
Property, plant and equipment	313,540
Other intangibles	289,000
Operating lease right-of-use assets	34,347
Other non-current assets	1,045
Current liabilities	(115,704)
Current portion of operating lease liabilities	(11,659)
Operating lease liabilities, less current portion	(26,128)
Deferred tax liabilities	(85,908)
Other long-term liabilities	(2,685)
Total identifiable net assets	546,950
Goodwill (i)	683,463
Total purchase price	$	1,230,413

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(i) Goodwill represents the excess of the fair value of the net assets acquired over the purchase price. Goodwill of $683.5 million was assigned to the Environmental Sales & Service reporting unit and is attributable to the future economic benefits arising from the acquired operations, synergies and the acquired workforce of HydroChemPSC. None of the goodwill related to this acquisition will be deductible for tax purposes.

Of the $289.0 million of acquired intangibles, the Company recorded a customer relationship intangible for $215.0 million with an estimated useful life of 25 years, an intangible asset for developed technology for $65.0 million with a useful life of 10 years and a trademark/tradename intangible asset for $9.0 million with an estimated useful life of 2 years. The fair values of the acquired intangibles were determined by using discounted cash flow valuation methods with significant estimates and assumptions related to future cash flows driven by estimated revenue growth, operational performance, customer attrition and royalty rates.

The Company's consolidated statement of operations for the year ended December 31, 2021 includes $166.1 million of direct revenues and $166.4 million of expense, including $12.3 million of incremental depreciation and amortization related to the operations of the operations of the acquired business and the $6.0 million of severance and integration costs subsequent to its acquisition on October 8, 2021.

Unaudited Pro Forma Financial Information

The following table presents unaudited pro forma combined summary financial information for the years ended December 31, 2021 and December 31, 2020, respectively, and assumes the acquisition of HydroChemPSC occurred on January 1, 2020 (in thousands):


	2021		2020
Pro forma combined revenues	$	4,380,724	$	3,859,430
Pro forma combined net income	229,807		149,219

The pro forma results do not include any costs incurred directly attributable to the acquisition of HydroChemPSC. The pro forma results do reflect impacts resulting from the issuance of $1.0 billion senior secured term loans issued in connection with the acquisition assuming interest rates in effect at the time of the acquisition.

This pro forma financial information is not necessarily indicative of the Company's consolidated operating results that would have been reported had the transactions been completed as described herein, nor is such information necessarily

indicative of the Company's consolidated results for any future period. Interest expense used in calculating the pro forma net income in both periods did not contemplate the interest rate swap that the Company put in place in early 2022. See Note 11, "Financing Arrangements."

Other 2021 Acquisition Activity

On March 27, 2021, the Company acquired a privately-owned business for $22.8 million cash consideration. The acquired company increases the Safety-Kleen Sustainability Solutions segment's network within the south central United States. In connection with this acquisition, a preliminary goodwill amount of $16.3 million was recognized. The results of operations for this acquired business were not material in 2021.

On June 29, 2021, the Company signed a definitive agreement with Vertex Energy, Inc. ("Vertex") to acquire certain assets related to Vertex's used motor oil collection and re-refinery business in an all-cash transaction for $140.0 million, subject to working capital and other adjustments. On January 25, 2022, Vertex and the Company mutually agreed to terminate the planned acquisition. In connection with the termination, in early 2022, Vertex paid Clean Harbors a breakup fee of $3.0 million pursuant to the agreement.

2020 Acquisition

On April 17, 2020, the Company acquired a privately-owned business for $8.8 million cash consideration. The acquired company expands the Safety-Kleen Sustainability Solutions segment's oil re-refining operations to the northeast United States. In connection with this acquisition, goodwill of $1.4 million was recognized. The results of operations of this acquired business were not material in 2020.

2019 Acquisitions

On May 31, 2019, the Company acquired a privately-owned business for $14.8 million cash consideration. The acquired company expands the environmental services and hazardous materials management services of the Company and the operations of this acquisition are included in the Environmental Services segment. In connection with this acquisition, a goodwill amount of $7.4 million was recognized.

On March 1, 2019, the Company acquired certain assets of a privately-owned business for $10.4 million cash consideration. The acquired business has components included in both the Environmental Services and Safety-Kleen Sustainability Solutions segments. In connection with this acquisition, a goodwill amount of $5.2 million was recognized.