-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vrt+32TUAQQpTJVyPGl1VWCE0zZ2Asp8onCBcXNcB/Nk4rRrlg07PuJdkEx4Ta4t h89waw/t+zyxzU+cSoqwZw== 0000950135-96-004860.txt : 19961115 0000950135-96-004860.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950135-96-004860 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEAN HARBORS INC CENTRAL INDEX KEY: 0000822818 STANDARD INDUSTRIAL CLASSIFICATION: HAZARDOUS WASTE MANAGEMENT [4955] IRS NUMBER: 042997780 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-54191 FILM NUMBER: 96660799 BUSINESS ADDRESS: STREET 1: PO BOX 327 STREET 2: 325 WOOD ROAD CITY: BRAINTREE STATE: MA ZIP: 02184 BUSINESS PHONE: 6178491800 MAIL ADDRESS: STREET 1: PO BOX 327 STREET 2: 325 WOOD ROAD CITY: BRAINTREE STATE: MA ZIP: 02184 10-Q 1 CLEAN HARBORS, INC. QUARTERLY REPORT ON FORM 10-Q 1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 1996 ---------- Commission File Number 0-16379 CLEAN HARBORS, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-2997780 (State of Incorporation) (IRS Employer Identification No.) 1501 Washington Street, Braintree, MA 02184 (Address of Principal Executive Offices) (Zip Code) (617) 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 9,743,152 ---------------------------- -------------------------------- (Class) (Outstanding at November 6, 1996) =============================================================================== 2 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, ------------------- ------------------ 1996 1995 1996 1995 ------------------- ------------------ Revenues $50,738 $54,398 $146,112 $156,447 Cost of revenues 39,515 41,253 113,333 115,472 Selling, general and administrative expenses 8,768 10,267 27,248 29,748 Depreciation and amortization 2,416 2,567 7,432 7,552 ------- ------- -------- -------- Income (loss) from operations 39 311 (1,901) 3,675 Interest expense, net 2,362 2,328 6,870 6,462 ------- ------- -------- -------- Loss before benefit from income taxes (2,323) (2,017) (8,771) (2,787) Benefit from income taxes (581) (817) (2,782) (1,200) ------- ------- -------- -------- Net loss $(1,742) $(1,200) $ (5,989) $ (1,587) ======= ======= ======== ======== Net loss per common and common equivalent share $ (.19) $ (.14) $ (.66) $ (.20) ======= ======= ======== ======== Weighted average common and common equivalent shares outstanding 9,685 9,435 9,623 9,433 ======= ======= ======== ========
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, 1996 1995 (Unaudited) ------------- ------------ ASSETS Current assets: Cash $ 550 $ 225 Restricted investments 1,921 2,460 Accounts receivable, net of allowance for doubtful accounts 43,400 48,417 Prepaid expenses 2,381 2,039 Supplies inventories 2,894 2,970 Income tax receivable 2,500 722 Deferred tax asset 4,436 2,415 -------- -------- Total current assets 58,082 59,248 Property, plant and equipment: Land 8,231 8,364 Buildings and improvements 39,527 39,770 Vehicles and equipment 78,055 77,384 Furniture and fixtures 2,191 2,155 Construction in progress 1,744 1,317 -------- -------- 129,748 128,990 Less - Accumulated depreciation and amortization 59,603 54,256 -------- -------- Net property, plant and equipment 70,145 74,734 -------- -------- Other assets: Restricted investments 6,154 5,207 Goodwill, net 21,660 22,202 Permits, net 12,829 13,489 Other 4,367 3,436 -------- -------- Total other assets 45,010 44,334 -------- -------- Total assets $173,237 $178,316 ======== ========
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, 1996 1995 (Unaudited) ------------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term obligations $ 4,490 $ 3,605 Accounts payable 19,693 18,614 Accrued disposal costs 7,534 7,446 Other accrued expenses 13,425 17,886 Income tax payable 47 --- -------- -------- Total current liabilities 45,189 47,551 -------- -------- Long-term obligations, less current maturities 73,575 70,391 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, 1996 and December 31, 1995 (liquidation preference of $5.6 million) 1 1 Common Stock, $.01 par value Authorized - 20,000,000 shares; Issued and outstanding - 9,690,612 shares at September 30, 1996 and 9,524,676 shares at December 31, 1995 97 96 Additional paid-in capital 59,318 58,871 Unrealized loss on restricted investments, net of tax (32) (7) Retained earnings (accumulated deficit) (4,911) 1,413 -------- -------- Total stockholders' equity 54,473 60,374 -------- -------- Total liabilities and stockholders' equity $173,237 $178,316 ======== ========
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, ------------------ 1996 1995 ------- ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(5,989) $(1,587) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 7,432 7,552 Deferred taxes (2,004) (633) Allowance for doubtful accounts 480 215 Amortization of deferred financing costs 477 365 Gain on sale of fixed assets (33) (17) Changes in assets and liabilities: Accounts receivable 4,537 (5,034) Refundable income taxes (1,778) (1,360) Prepaid expenses (342) (640) Supplies inventories 76 (344) Accounts payable 1,079 1,498 Accrued disposal costs 88 1,136 Other accrued expenses (4,461) 2,987 Taxes payable 47 -- ------- ------- Net cash (used in) provided by operating activities (391) 4,138 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (2,467) (11,352) Additions to permits (13) (75) Proceeds from sale and maturities of restricted investments 730 42 Cost of restricted investments acquired (1,181) (5,998) Increase in other assets (977) (1,737) Proceeds from sale of fixed assets 919 26 ------- ------- Net cash used in investing activities (2,989) (19,094) ------- -------
The accompanying notes are an integral part of these consolidated financial statements. (4) 7 CLEAN HARBORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) Unaudited (in thousands)
NINE MONTHS ENDING SEPTEMBER 30, ------------------ 1996 1995 ---- ----- CASH FLOWS FROM FINANCING ACTIVITIES: Preferred stock dividend distribution -- (335) Issuance of long-term debt (excluding the long-term revolver) 16,667 10,000 Net borrowings under long-term revolver (7,130) 6,341 Payments on long-term obligations (5,458) (1,158) Additions to deferred financing costs (487) (802) Proceeds from stock issuance/stock options 113 15 ------- ------- Net cash provided by financing activities 3,705 14,061 ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 325 (895) Cash and equivalents, beginning of year 225 1,000 ------- ------- Cash and equivalents, end of period $ 550 $ 105 ======= ======= Supplemental Information: Non cash investing and financing activities: Stock dividend on preferred stock $ 335 -- Capital lease obligations -- $ 196
For the nine months ended September 30, 1995 there were $1,799,000 of accrued liabilities assumed as a result of the acquisition of the incinerator in Kimball, Nebraska on May 12, 1995. The accompanying notes are an integral part of these consolidated financial statements. (5) 8 CLEAN HARBORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Unaudited (in thousands)
Series B Preferred Stock Common Stock --------------- --------------- Retained Number $0.01 Number $0.01 Additional Unrealized Loss Earnings Total of Par of Par Paid-In on Restricted (accumulated Stockholders' Shares Value Shares Value Capital Investments deficit) Equity ------ ----- ------ ----- ---------- --------------- ------------ ------------- Balance at December 31, 1995 112 $1 9,525 $96 $58,871 $ (7) $ 1,413 $ 60,374 Preferred stock dividends: Series B -- -- 118 1 334 -- (335) -- Employee stock purchase plan -- -- 48 -- 113 -- -- 113 Change in unrealized loss on restricted investments, net of tax -- -- -- -- -- (25) -- (25) Net Loss -- -- -- -- -- -- (5,989) (5,989) --- -- ----- --- ------- ---- ------- -------- Balance at September 30, 1996 112 $1 9,691 $97 $59,318 $(32) $(4,911) $ 54,473 === == ===== === ======= ==== ======= ========
The accompanying notes are an integral part of these consolidated financial statements. (6) 9 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, 1996 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, 1995 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 INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Net income (loss) per common and common equivalent share is based on net income(loss) less preferred stock dividend requirements divided by the weighted average number of common and common equivalent shares outstanding during each of the respective periods. Fully diluted net income (loss) per common share has not been presented as the amount would not differ significantly from that presented. Common share equivalents included in the computation represent shares issuable upon assumed exercise of stock options which would have a dilutive effect in periods where there are earnings. NOTE 3 FINANCING ARRANGEMENTS On September 6, 1996, the Company refinanced its $45,000,000 revolving credit and term loan agreement (the "Loan Agreement") with a financial institution by (i) guaranteeing $10,000,000 of 10.75% Economic Development Revenue Bonds due September 1, 2026 issued by the City of Kimball, Nebraska (the "Bonds"), and (ii) amending the Loan Agreement to reduce the maximum credit thereunder from $45,000,000 to $35,000,000. The Company used the net proceeds from the sale of the Bonds to repay a portion of its outstanding debt under the Loan Agreement. That portion was originally incurred for acquisition costs, including the costs relating to insurance premiums, associated with the acquisition of the Kimball incinerator ("the Facility"). In connection with the issuance of the Bonds, the Company has entered into a facilities lease with the City of Kimball whereby the City acquired a leasehold interest in the Facility and the Company leased the Facility back from the City. The Company retains title to the Facility. (7) 10 CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 FINANCING ARRANGEMENTS (continued) The Bonds were issued at 100% of their principal value. The Bonds are not redeemable prior to September 1, 2006. From that date until September 1, 2008, the Bonds are redeemable at a premium. After September 1, 2008, the Bonds are redeemable at par. Sinking fund payments begin on September 1, 1999 in the amount of $100,000 annually until the year 2008 when the sinking fund payments will gradually increase annually. The Bonds provide for certain covenants relating to, among others, incurrence of additional debt, debt service coverage, earnings before income taxes, depreciation and amortization ("EBITDA") coverage and the ratio of EBITDA to total debt. Certain of these covenants do not become effective until September 30, 1997. If for any fiscal quarter ending on or after September 30, 1997, the debt service coverage ratio is less that 1.25 to 1, the Company will be required to pay in six equal monthly installments into a debt service reserve fund held by the Trustee for the Bonds a total amount equal to the maximum annual debt service for one year on the Bonds. (8) 11 CLEAN HARBORS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REVENUES Revenues for the third quarter of 1996 were $50,738,000, down 7% as compared to revenues of $54,398,000 for the third quarter of the prior year. Revenues for the nine months of 1996 were $146,112,000, which was a 7% decline from the revenues for the nine months of 1995 of $156,447,000. The revenue decline, for the comparative three months and nine months, was the result of industry-wide pricing pressures and a decrease in the volumes of wastes which were processed through the Company's facilities. There are many factors which have impacted, and will continue to impact, 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; industry-wide over capacity; and direct shipment by generators of waste to the ultimate treatment or disposal location. The Company has responded to these industry changes by enhancing its waste treatment capabilities and improving operating efficiencies. In the second quarter of 1995, the Company acquired an incinerator in Kimball, Nebraska which allows the Company to dispose of waste, reducing reliance on third parties. On September 30, 1996, the Company had service centers and sales offices located in 24 states and Puerto Rico, and operated 12 waste management facilities. The following table sets forth, for the periods indicated, the Company's revenues by region, based upon the locations of its service centers as of September 30, 1996. Service Center Revenues By Region For The Seven Quarters Ended September 30, 1996 (in thousands; unaudited)
3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96 9/30/96 ------- ------- ------- -------- ------- ------- ------- Northeast $19,693 $21,449 $20,275 $21,362 $17,617 $21,159 $22,524 Mid-Atlantic 15,367 16,817 17,317 16,817 13,052 15,720 15,248 Central 7,138 9,450 9,388 8,936 8,920 7,648 7,708 Midwest 4,952 7,183 7,418 5,688 6,147 5,111 5,258 ------- ------- ------- ------- ------- ------- ------- Total $47,150 $54,899 $54,398 $52,803 $45,736 $49,638 $50,738
(9) 12 CLEAN HARBORS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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, ------------------ ----------------- 1996 1995 1996 1995 --------- -------- ------- -------- Revenues 100.0% 100.0% 100.0% 100.0% Cost of revenues: Disposal costs paid to third parties 14.6 13.7 14.3 15.1 Other costs 63.3 62.1 63.3 58.7 ------ ------ ------ ------- Total cost of revenues 77.9 75.8 77.6 73.8 Selling, general and administrative expenses 17.3 18.9 18.6 19.0 Depreciation and amortization of intangible assets 4.8 4.7 5.1 4.8 Income (loss) from operations 0.0 0.6 (1.3) 2.3 Other Data: ---------- Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) (in thousands) $2,455 $2,878 $5,531 $11,227
COST OF REVENUES 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 14.3% of revenue in the first nine months of 1996 from 15.1% of revenue in the first nine months of 1995. The primary reason for the reduction in outside disposal cost was the acquisition of the Kimball incinerator. The remaining costs increased to 63.3% of revenue for the three and nine months ended September 30, 1996, respectively as compared to 62.1% and 58.7% for the same periods of the prior year. A portion of this increase in "other costs" was associated with the operating costs of the Kimball incinerator. (10) 13 CLEAN HARBORS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is continuing to implement cost savings plans to reduce operating costs. This implementation included a reduction in workforce of approximately 300 employees since September of 1995. Approximately 160 employees were eliminated in the third quarter of 1996. Another cost savings program which began in September of 1996 was the CleanEXPRESS program. This program is directed towards fully utilizing the Company's newly expanded Chicago facility by shipping waste materials directly from customers' locations. The cost savings plans are expected to reduce the Company's cost structure while improving service, quality and competitiveness in the marketplace. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses decreased 15% to $8,768,000 for the three months ended September 30, 1996 as compared to $10,267,000 for the same period of 1995. Selling, general and administrative expenses decreased 8% to $27,248,000 for the nine months ended September 30, 1996 as compared to $29,748,000 for the same period of 1995. The decline in expenses represents the Company's continued efforts to control costs in areas such as the rental of office space and a reduction in administrative staff. While there continues to be an effort to expand the Company's sales and marketing capabilities, any increases in these costs have been more than offset by cost savings programs. The Company does not anticipate any significant increases for the remainder of 1996 in selling, general and administrative expenses. INTEREST EXPENSE Interest expense increased to $2,362,000 during the third quarter of 1996 from the previous year's interest expense of $2,328,000 for the same period. Interest expense increased to $6,870,000 during the first nine months of 1996 from $6,462,000 for the comparable period of the prior year. The increase in interest expense is due to the average borrowings for the nine months ended September 1996 being $6 million greater than for the nine months ended 1995. This increase in debt is primarily due to the costs associated with the acquisition of the Kimball incinerator. A portion of the increase in interest expense during 1996 was offset by interest income from restricted investments. INCOME TAXES The effective income tax rate for the three months ended September 30, 1996 was 25% as compared to 41% for the comparable period of 1995. The effective income tax rate for the nine months ended September 30, 1996 was 32% as compared to 43% for the comparable period of 1995. The rate can fluctuate significantly depending on the amount of income before taxes, as compared to the fixed amount of goodwill amortization and other non-deductible items. 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 believes that no current audits or assessments will result in charges which would be material to results of operations. (11) 14 CLEAN HARBORS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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. The Company's future operating results may be affected by a number of factors, including the Company's ability to: integrate successfully the CleanEXPRESS 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 while expanding its product offerings into other markets; 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 and others which may be opened in the future. The future operating results of the Kimball incinerator may be affected by factors such as its ability to: obtain sufficient volumes of waste at prices which produce revenue sufficient to offset the operating costs of the facility; minimize downtime and disruptions of operations; and compete successfully against other incinerators which have an established share of the incineration market. 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 The Company has financed its operations and capital expenditures primarily by additions to long-term debt. During the nine months ended September 30, 1996, the Company spent $2,467,000 on additions to plant and equipment and construction in progress, as compared to its capital expenditures of $5,998,000 during the same period of the prior year, during which the Company also spent $5,550,000 on the acquisition of the Kimball incinerator. During the nine months ended September 30, 1996, net additions to long-term debt were $4,069,000, as compared to net additions to long-term debt of $14,942,000 during the same period of the previous year. During the three months ended September 30, 1996 the Company received $753,000 from the sale of an office building. (12) 15 CLEAN HARBORS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During the third quarter of 1996, the Company refinanced its $45,000,000 revolving credit and term loan agreement (the "Loan Agreement") with a financial institution by (i) guaranteeing $10,000,000 of 10.75% Economic Development Revenue Bonds due September 1, 2026 issued by the City of Kimball, Nebraska (the "Bonds"), and (ii) amending the Loan Agreement to reduce the maximum credit thereunder from $45,000,000 to $35,000,000. The Company used the net proceeds from the sale of the Bonds to repay a portion of its outstanding debt under the Loan Agreement. That portion was originally incurred to pay for a portion of the costs of the Kimball incinerator and landfill, including the prepaid closure insurance programs, as well as the costs of improvements to the facility. As amended, the Loan Agreement provides for a $24,500,000 revolving credit portion (the "Revolver") and a $10,500,000 term loan portion. The Loan Agreement allows the Company to make regularly scheduled payments of principal and interest on its other indebtedness for borrowed money (including capital 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. The Company received from its lender a waiver for compliance with the Loan Agreement covenant requiring $4,500,000 of excess availability, which was granted through November 1996. The Company is continuing to renegotiate some of the terms of the Loan Agreement. 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. The Company elected to pay the 1996 dividends in common stock. Accordingly, the Company has issued a total of 118,493 shares of common stock to the holders of the preferred stock for the year. The Company anticipates that the preferred stock dividends payable through 1996 will be paid in common stock. The Company believes it has adequate liquidity for its ongoing operations and planned capital needs. It is expected that capital expenditures in 1996 will be approximately $3,000,000. (13) 16 CLEAN HARBORS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS -------------------------- No reportable events have occurred which would require modification of the discussion under Item 3 - Legal Proceedings contained in the Company's Report on Form 10-K for the Year Ended December 31, 1995. 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 4.9 - Third Amendment to Financing Agreements dated September 6, 1996 by and between Congress Financial Corporation (New England), the Company's Subsidiaries as Borrowers, and Clean Harbors, Inc. as Guarantor. 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 13, 1996 By: /s/ Alan S. McKim ----------------------------------- Alan S. McKim President and Chief Executive Officer Dated: November 13, 1996 By: /s/ Donald N. Leef ----------------------------------- Donald N. Leef Vice President, Treasurer and Chief Financial Officer (15) EX-4.9 2 THIRD AMENDMENT TO FINANCE AGREEMENT 1 EXHIBIT 4.9 September 6, 1996 CLEAN HARBORS ENVIRONMENTAL SERVICES, INC. CLEAN HARBORS TECHNOLOGY CORPORATION CLEAN HARBORS KINGSTON FACILITY CORPORATION CLEAN HARBORS OF BRAINTREE, INC. CLEAN HARBORS SERVICES, INC. CLEAN HARBORS OF NATICK, INC. CLEAN HARBORS OF CONNECTICUT, INC. MURPHY'S WASTE OIL SERVICE, INC. CLEAN HARBORS OF CLEVELAND, INC. MR. FRANK, INC. SPRING GROVE RESOURCE RECOVERY, INC. Re: Third Amendment to Financing Agreements - Issuance of City of Kimball, Nebraska Economic Development Revenue Bonds ("Third Amendment") --------------------------------------------------------------- Gentlemen: Reference is made to the Loan and Security Agreement dated May 8, 1995, as amended, between you and the undersigned (the "Loan Agreement"). All capitalized terms not otherwise defined herein shall have the meanings given such terms in the Loan Agreement. Borrowers have arranged for the issuance of $10,000,000 of City of Kimball, Nebraska Economic Development Revenue Bonds (Clean Harbors, Inc.), Series 1996 (the "Bonds"), the proceeds of which will reimburse the Borrowers for costs incurred in connection with the Kimball, Nebraska waste disposal facility (the "Facility") owned by Clean Harbors Technology Corporation ("CHTC"). The proceeds of the Bonds less certain costs of issuance will be $9,800,000. Upon such issuance, not less than $9,300,000 in proceeds are to be immediately paid to the Lender and applied to the Obligations and up to $500,000 of additional proceeds will be subject to certain escrow conditions and will be, once released by the Trustee for the Bonds, paid to Lender and applied to the Obligations. In connection with the issuance of the Bonds, Borrowers have requested that certain amendments be made in the Loan Agreement. Subject to the terms and conditions hereof, the Lender agrees with the Borrowers as follows: (1) Section 1.31 of the Loan Agreement is deleted in its entirety and replaced with the following: 1 2 "1.31 "Maximum Credit" shall mean $35,000,000.00. (2) Section 1.48 of the Loan Agreement is deleted in its entirety and replaced with the following: "1.48 "Revolving Credit Limit" shall mean the amount of $24,500,000.00." (3) Notwithstanding the provisions of Section 9.8, the Lender consents to the lease and leaseback of the Facility by CHTC pursuant to a certain Facilities Lease (the "Facilities Lease") and Lease Agreement (the "Lease") between CHTC and the City of Kimball, Nebraska, each dated as of September 1, 1996; provided, that no mortgage, security interest or lien on the Facility or the assets of CHTC, the Parent or the other Borrowers is granted to secure the repayment of the Lease or the Bonds (other than a debt service reserve which the Parent and Borrowers may be required to be fund with the Trustee under certain circumstances for up to one year of maximum debt service on the Bonds) and the Facilities Lease and Lease shall in all respects be subject to the Mortgage of the Lender on the Facility and the real estate on which the Facility is located. The Borrowers further covenant and agree that upon release from escrow of the additional Bond proceeds and any release of funds from the above-described debt service reserve or any other account maintained in respect of the Bonds or Lease, Borrowers shall cause such funds to be paid to the Payment Account. (4) Notwithstanding the provisions of Section 9.9 and 9.10, the Lender consents (a) to CHTC incurring the obligations under the Lease Agreement and (b) to the other Borrowers and the Parent guarantying the obligations of CHTC pursuant to the Lease Agreement; provided, that such obligations and guaranties are and remain unsecured (except to the extent of the debt service reserve fund described above) and subject to the provisions of Section 9.9. (5) Section 10.1 is amended by deleting the period at the end of clause (o), inserting "; or" in place thereof and adding the following clause to the end thereof as clause (p): "(p) there shall be a default under the Lease Agreement dated as of September 1, 1996 between the CHTC and the City of Kimball, Nebraska or the City of Kimball, Nebraska Economic Development Bonds (Clean Harbors, Inc.) Series, 1996 or under any of the agreements, instruments or documents relating thereto." (6) This Third Amendment and the Lender's obligations hereunder shall not be effective until each of the following conditions are satisfied: 2 3 (a) The Bonds will be duly issued, all documentation necessary therefor executed and delivered and all conditions thereto satisfied without amendment or waiver and all of the proceeds thereof that are not subject to escrow with the Trustee and, in any event, not less than $9,300,000, shall be paid to Lender; (b) all requisite corporate action and proceedings of the Borrowers in connection with this Third Amendment shall be satisfactory in form and substance to Lender and Lender shall receive certified copies of such corporate action and proceedings as Lender may request; and (c) Lender shall have received in form and substance satisfactory to Lender, an opinion of counsel to Borrowers with respect to this Third Amendment. (7) Each Borrower confirms and agrees that (a) all representations and warranties contained in the Loan Agreement and in the other Financing Agreements are on the date hereof true and correct in all material respects (except for changes that have occurred as permitted by the covenants in Section 9 of the Loan Agreement or as permitted under this Third Amendment), and (b) it is unconditionally and jointly and severally liable for the punctual and full payment of all Obligations, including, without limitation, all charges, fees, expenses and costs (including attorneys' fees and expenses) under the Financing Agreements, and that no Borrower has any defenses, counterclaims or setoffs with respect to full, complete and timely payment of all Obligations. (8) Each Guarantor, for value received, hereby assents to the Borrowers' execution and delivery of this Amendment, and to the performance by the Borrowers of their respective agreements and obligations hereunder. This Amendment and the performance or consummation of any transaction or matter contemplated under this Amendment, shall not limit, restrict, extinguish or otherwise impair any of the Guarantor's liability to Lender with respect to the payment and other performance obligations of the Guarantors pursuant to the Guarantees, dated May 8, 1995 executed for the benefit of Lender. Each Guarantor acknowledges that it is unconditionally liable to Lender for the full and complete payment of all Obligations including, without limitation, all charges, fees, expenses and costs (including attorney's fees and expenses) under the Financing Agreements and that such Guarantor has no defenses, counterclaims or setoffs with respect to full, complete and timely payment of any and all Obligations. (9) Borrowers hereby agree to pay to Lender all reasonable attorney's fees and costs which have been incurred or may in the future be incurred by Lender in connection with the negotiation and preparation of this Amendment and any other documents and agreements prepared in connection with this Amendment. The undersigned confirm that the Financing Agreements remain in full force and effect without amendment or modification of any kind, except for the amendments explicitly set forth herein. The undersigned further confirm that no Event of Default or events which with notice or the passage of time or both would constitute an Event of Default have occurred and are continuing. The execution and delivery of this Amendment by Lender shall not be 3 4 construed as a waiver by Lender of any Event of Default under the Financing Agreements. This Amendment shall be deemed to be a Financing Agreement and, together with the other Financing Agreements, constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior dealings, correspondence, conversations or communications between the parties with respect to the subject matter hereof. If you accept and agree to the foregoing please sign and return the enclosed copy of this letter. Thank you. Very truly yours, CONGRESS FINANCIAL CORPORATION (NEW ENGLAND) By: ------------------------------------ Name: ------------------------------ Title: ------------------------------ 4 5 AGREED: - ------- CLEAN HARBORS ENVIRONMENTAL SERVICES, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President CLEAN HARBORS TECHNOLOGY CORPORATION By: ---------------------------------- Name: Stephen Moynihan Title: Vice President CLEAN HARBORS KINGSTON FACILITY CORPORATION By: ---------------------------------- Name: Stephen Moynihan Title: Vice President CLEAN HARBORS OF BRAINTREE, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President CLEAN HARBORS SERVICES, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President CLEAN HARBORS OF NATICK, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President 5 6 CLEAN HARBORS OF CONNECTICUT, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President MURPHY'S WASTE OIL SERVICE, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President CLEAN HARBORS OF CLEVELAND, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President MR. FRANK, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President SPRING GROVE RESOURCE RECOVERY, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President CLEAN HARBORS, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President 6 7 CLEAN HARBORS OF BALTIMORE, INC. By: ---------------------------------- Name: Stephen Moynihan Title: Vice President 7 EX-11 3 COMPUTATION OF INCOME PER SHARE 1 EXHIBIT 11 CLEAN HARBORS, INC. AND SUBSIDIARIES COMPUTATION OF NET INCOME PER SHARE FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 1996 (in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- -------------------- 1996 1995 1996 1995 ------- ------- ------- ------- Net loss $(1,742) $(1,200) $(5,989) $(1,587) Plus preferred dividends accrued 112 112 336 335 ------- ------- ------- ------- Adjusted net loss $(1,854) $(1,312) $(6,325) $(1,922) ======= ======= ======= ======= Loss per common and common equivalent share: Weighted average number of shares outstanding 9,685 9,435 9,623 9,433 Incremental shares for stock options under treasury stock method -- -- -- -- ------- ------- ------- ------- Weighted average number of common and common equivalent shares outstanding 9,685 9,435 9,623 9,433 Loss per common and common equivalent share $ (.19) $ (.14) $ (.66) $ (.20) ======= ======= ======= ======= Loss per common and common equivalent share - assuming full dilution: Weighted average number of shares outstanding 9,685 9,435 9,623 9,433 Incremental shares for stock options under treasury stock method -- -- -- -- ------- ------- ------- ------- Weighted average number of common and common equivalent shares outstanding - assuming full dilution 9,685 9,435 9,623 9,433 ======= ======= ======= ======= Loss per common and common equivalent share - assuming full dilution $ (.19) $ (.14) $ (.66) $ (.20) ======= ======= ======= =======
EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 9-MOS DEC-31-1996 SEP-30-1996 1 550 1,921 44,514 (1,114) 2,894 58,082 129,748 59,603 173,237 45,189 73,575 97 0 1 54,375 173,237 146,112 146,112 113,333 113,333 0 0 6,870 (8,771) (2,782) (5,989) 0 0 0 (5,989) (.66) 0
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