2011 clh annual report (1)

7/29/2019 2011 CLH Annual Report (1)

1/124People & Technology Creating a Safer, Cleaner Environmen

2011 Annual Report


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b u n H

Clean Harbors is the leading provider of environmental, energy and industrial services throughout North America.

The Company serves more than 60,000 customers, including a majority of the Fortune 500 companies, thousands of smaller

private entities and numerous federal, state, provincial and local governmental agencies. Headquartered in Norwell, Massachusetts,

Clean Harbors has more than 200 locations, including over 50 waste management facilities, throughout North America in

37 U.S. states, 7 Canadian provinces, Mexico and Puerto Rico. For more information, visit www.cleanharbors.com.

As refected in Clean Harbors taglinePeople and Technology Creating a Saer,Cleaner Environment, our core business is toprovide industry, government, and the publica wide range o environmental, energy andindustrial services that protect and restoreNorth Americas natural environment. Whenproviding these services, we are committedto the recycling, reuse and reclamation o

wastes whenever possible.

As we provide these services, we are commit-ted to ensuring that our own operations areenvironmentally responsible. Through oureorts to implement numerous energy e-ciency improvements, green purchasing, com-pany-wide recycling programs, and varioustransportation initiatives, including greater railutilization and limits on the speeds and idlingtime o our many vehicles, we are making ouroperations more environmentally sustainable.

In 2011, we installed a 1.5 MW solar array atour closed and capped landll located in New

Jersey to provide electric power or a continu-ously operating groundwater decontamination

pump and treatment system at the site.This solar array provides virtually all o thepower needed to operate the system witha sustainable supply o renewable electricenergy and is an adaptive reuse o anotherwise unusable browneld site.

Throughout the year, Clean Harbors recy-cling processeswhich handle various waste

materials, including solvents, used oil, catalystand renery waste, electronic equipment,transormers and transormer oil, mercury andmercury containing materials, and unusedpaintoset the equivalent carbon dioxideemissions o over 325,000 barrels o oil.

Clean Harbors services protect the ozonelayer rom the destructive eects o chloro-fuorocarbons (CFCs), which are 5,000 to10,000 times more destructive to the ozonelayer than other greenhouse gases. CleanHarbors has the highest U.S. EnvironmentalProtection Agency approved CFC disposalcapacity regulated under the Montreal

Protocol, and we destroyed over 1.3 millionpounds o CFCs in 2011. The destruction

o this volume o CFCs at the CompanysEl Dorado, Arkansas, acility led to the reg-istration o over 2.8 million metric tons oavoided carbon dioxide emissions with theClimate Action Reserve, a greenhouse gasregistry aliated with the State o Caliornia.

Clean Harbors recycling eorts, combinedwith our CFC destruction service, have agreenhouse gas impact equal to removing535,652 passenger vehicles rom the roador one year.

procing h environmn andenvironmna usainabiiy

In 2011, Clean Harbors installed a 1.5 MW solar array at their

closed and capped landfll located in New Jersey to provide electricpower or a continuously operating groundwater decontaminationpump and treatment system at the site. This solar array is an

adaptive reuse o an otherwise unusable brownfeld site.


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1.7

1.0

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...... ...... ......2005 2006 2007 2008 2009 2010 20110.0

0.5

1.0

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3.5

Dear Shareholders,Clean Harbors extended its recent momentum withanother year of rapid growth and expansion in 2011.We achieved organic growth in each of our fouroperating segments while successfully acquiring severalvaluable businesses, including Peak Energy Servicesand Destiny Resource Services. In doing so, we furtherestablished our leadership position in each of ourthree key marketsEnvironmental Services, EnergyServices, and Industrial Servicesand delivered recordnancial performance, as revenues grew 15% to nearly$2 billion and EBITDA increased to $350 million.

We also completed a two-for-one stock split in July2011, in an effort to further expand our shareholderbase and improve liquidity.

As a result of our acquisitions and internal expansioninitiatives, Clean Harbors ended 2011 with morethan 8,300 employees after entering the year withapproximately 6,800. We believe that our team, whichconsists of highly experienced personnel across theirrespective elds, is unmatched in our industry. Noneof our competitors can match our depth of expertiseacross such a wide range of environmental, energy andindustrial services. By broadening and strengthening

our organizational structure and internal systems, wehave prepared the Companys operations for its nextstage of growth.

Our commitment to excellence in safety and servicealso remained crucial to Clean Harbors success in2011. We exceeded our key safety metrics for the year,besting the scores we received in 2010, which is a

credit to our entire organization. The comprehensivecompany-wide SafetyFirst!program we began in 2009has been a great success, and today is providing us wita signicant advantage in the marketplace. We recog-nize its importance, as do our customers.

All of our operating segments made broad-based con-tributions to Clean Harbors success in 2011. TechnicServices delivered an excellent year, driven by a steadystream of volumes through our network of disposalassets, which includes our incinerators, landlls,TSDFs, and wastewater treatment facilities. Keeping

our plants running at high utilization levels duringmuch of the year enabled us to increase efciencies,capture pricing gains, and maximize prots.

Within Field Services, our strategy of geographicexpansion, adding service offerings and capitalizingon cross-selling opportunities, is proving to be highlyeffective. Our growth in this segment during 2011nearly all internally-generatedreected a healthy mof base business and large-scale projects. Thanks to ouwork in the Gulf of Mexico and Michigan in 2010,Clean Harbors has established a national reputationas the premier provider of large-scale oil spill responseservices. This helped position us to realize more than$40 million in emergency response revenue in 2011,as we participated in the Yellowstone River cleanupefforts following a major oil pipeline spill.

Our Oil and Gas Field Services segment stood out asour top performer in 2011, more than doubling itsrevenue from the prior year. While adding Peak andDestiny contributed signicantly to this growth, ourcore Energy business performed very well. We sawincreased activity in Western Canada as a result ofthe substantial levels of investment by major energy

companies in that region, while also benetting fromshale play-related work in both the United States andCanada. At the same time, Peak and Destiny enabledus to capitalize on numerous growth and cross-sellingopportunities. For example, Peak enhanced our one-stop-shop approach for customers by adding a rangeof services around the drill rig to our existing offer-ings. The close relationships we have now developedwith our energy customers position Clean Harborsto benet from the high levels of activity expected in2012 and beyond.

To Our Shareholders

People & Technology Creating a Safer, Cleaner EnvironmenPeople & Technology Creating a Safer, Cleaner Environmen

*Total Recordable Incident Rate

Clean Harbors TRIR*

Actual

Goals


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Our Industrial Services segment also achieved solid

growth during the year due to our recent acquisi-

tions, a ramp-up in oilsands activity, and a high

volume o work at our refnery customers. We have

increased our penetration o this important vertical

market and today work with 147 o the 159 refner-

ies in North America. In addition, we saw increased

demand or our specialty industrial services such

as outage and turnaround work. These assign-

ments typically require specialized equipment and

expertise, and requently complement our disposal

network by generating hazardous waste streams.

The combination o the Peak acquisition and ourinternal investments contributed to the strong per-

ormance o our lodging business in 2011.

Lodging has become a key competitive advantage

or us, both in managing our internal resources and

in ulflling our customers needs.

Looking ahead, we are excited about Clean Harbors

prospects or 2012. The Energy sector is particularly

promising, as levels o activity remain very high in

both the United States and Canada, supported by

the ongoing high oil price environment. Rig counts

are continuing to climb on both sides o the border

and investments are showing no signs o slowing.

The Bakken oil feld, the Marcellus Shale ormation,

and a number o energy-rich areas o Texas continue

to oer us a broad variety o U.S. opportunities.The story is similar north o the border, where

massive oilsands projects and numerous long-terminvestments across Western Canada are continuing

unabated.

We are continuing to see evidence that the gen-

eral economic recovery has taken hold in North

America. As a result, we intend to continue to

aggressively execute our two-pronged strategy o

internal investments and select acquisitions. Even

with the acquisitions we completed in 2011 and the

high level o capital we are investing internally, we

concluded the year with more than $260 millionin cash, which we plan to put to work. We will

remain active, and selective, on the acquisition rontin 2012 and have a variety o attractive candidates,

both large and small, in our pipeline.

On behal o our management team and Board o

Directors, I want to oer my sincere thanks to all

o our employees or producing the outstanding

results we achieved in 2011. And to our sharehold-

ers and customers, we extend our appreciation or

the confdence you have placed in Clean Harbors.

We are excited about our prospects or 2012 and arecommitted to continuing to reward your trust in the

years ahead.

Sincerely,

Alan S. McKim

Chairman, President and Chie Executive OfcerClean Harbors, Inc.

March 23, 2012

To Our Shareholders

$1,731.2

$1,984.1

2005 2006 2007 2008 2009 2010 2011

$829.8$946.9

$1,030.7 $1,074.2

Acquisitions, new service locations, and increasing demand for environmental andindustrial services are driving topline growth.

Annual Revenue

FY05-11 CAGR: 19%

$314.7

$350.0

2005 2006 2007 2008 2009 2010 2011

$119.9$133.3

$163.2 $157.6**

17.6%18.2%

14.7%**14.1%14.4%

12.7%

15.8%

Internal cost-saving initiatives coupled with leveraging our xed costs have driven

margin expansion.

* ForareconciliationofEBITDAtonetincome,pleaserefertotheCompanysAnnualReport onForm10-KledeachyearwiththeSecuritiesandExchangeCommission.

**Includingacquisition-relatedcostsof$8.1million.

Annual EBITDA*EBITDA

EBITDA Margin

$90.3

$711.2


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Income Statement Data 2011 2010 2009 2008 2007

Revenues $1,984,136 $1,731,244 $1,074,220 $1,030,713 $946,9

Cost of revenues (exclusive of items shown separately below) 1,379,991 1,210,740 753,483 707,820 664,4

Selling, general and administrative expenses 254,137 205,812 163,157 159,674 149,1

Accretion of environmental liabilities 9,680 10,307 10,617 10,776 10,4

Depreciation and amortization 122,663 92,473 64,898 44,471 37,5

Income from operations 217,665 211,912 82,065 107,972 85,2

Other income (expense) 6,402 2,795 259 (119) 1

Loss on early extinguishment of debt (2,294) (4,853) (5,473)

Interest expense, net (39,389) (27,936) (15,999) (8,403) (13,15

Income from continuing operations before provision forincome taxes 184,678 184,477 61,472 93,977 72,2

Provision for income taxes 57,426 56,756 26,225 36,491 28,0

Income from continuing operations 127,252 127,721 35,247 57,486 44,1

Income from discontinued operations, net of tax 2,794 1,439

Net income 127,252 130,515 36,686 57,486 44,1

Dividends on Series B preferred stock 2

Net income attributable to common stockholders $127,252 $130,515 $36,686 $57,486 $43,9

Basic earnings attributable to common stockholders 1 $2.40 $2.48 $0.74 $1.28 $1.

Diluted earnings attributable to common stockholders 1 $2.39 $2.47 $0.74 $1.26 $1.

Cash Flow Data

Net cash from operating activities $179,531 $224,108 $93,270 $109,590 $79,9

Net cash from investing activities (480,181) (125,687) (118,391) (84,515) (42,79

Net cash from nancing activities 258,740 (32,230) 3,584 116,795 2,7

Other Financial Data

Adjusted EBITDA2 $350,008 $314,692 $157,580 $163,219 $133,2

At December 31, (in thousands)

Balance Sheet Data 2011 2010 2009 2008 2007

Working capital $510,126 $446,253 $386,930 $307,679 $169,5

Goodwill 122,392 60,252 56,085 24,578 21,5

Total assets 2,085,803 1,602,475 1,401,068 898,336 769,8

Long-term obligations (including current portion) 538,888 278,800 301,271 53,630 123,4

Stockholders equity 900,987 780,827 613,825 429,045 202,8

1. All reporting periods reect 2-for-1 stock split completed in July 2011. Basic and diluted earnings per share based on income from continuingoperations for 2010 were $2.43 and $2.42 per share, respectively, and for 2009, they were both $0.71 per share.

2. See footnote 3 on pages 27 and 28 of the Annual Report on Form 10-K, incorporated herein, for a denition of Adjusted EBITDA andreconciliations of net income to Adjusted EBITDA and Adjusted EBITDA to net cash from operating activities.

Selected Financial Data

For the Year Ended December 31, (in thousands except per share amoun

People & Technology Creating a Safer, Cleaner EnvironmenPeople & Technology Creating a Safer, Cleaner Environmen


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Executive Ofcers

Alan S. McKim

Chairman of the Board of Directors, President and

Chief Executive Ofcer

James M. Rutledge

Vice Chairman of the Board, Treasurer and

Chief Financial Ofcer

John R. Beals

Senior Vice President, Controller and

Principal Accounting Ofcer

Jerry E. CorrellSenior Vice PresidentEnvironmental Sales*

George L. Curtis

Executive Vice PresidentPricing and Proposals*

Deirdre J. Evens

Executive Vice PresidentHuman Resources*

Simon R. Gerlin

Senior Vice PresidentInternal Audit and Compliance*

Eric W. Gerstenberg

PresidentEnvironmental Services*

Marvin Lefebvre

Executive Vice PresidentExploration Services*

David T. Musselman

Senior Vice President and General Counsel

William F. OConnor

Senior Vice PresidentRisk Management*

David M. Parry

PresidentEnergy & Industrial Services*

Phillip G. Retallick

Senior Vice PresidentRegulatory Affairs*

Thomas J. Seeger

Executive Vice PresidentAsset Management*

Michael J. Twohig

Executive Vice President and Chief Administrative Ofcer*

Brian P. Weber

Executive Vice PresidentCorporate Planning and Development*

Directors

Eugene Banucci

Founder, a Director and former Executive Chairman,

ATMI, Inc.

John P. DeVillars

Managing Partner,

BlueWave Capital LLC

Edward G. Galante

Former Senior Vice President,

Exxon Mobil Corporation

John F. KaslowRetired Executive Vice President and

Chief Operating Ofcer,

New England Electric System

Rod Marlin

Former President and Chief Executive Ofcer,

Eveready Inc.

Daniel J. McCarthy

Professor of Strategic Management,

Northeastern University

John T. PrestonManaging Partner,

TEM Capital

Andrea Robertson

Former Group Executive and Corporate Treasurer,

MasterCard Worldwide

Thomas J. Shields

Managing Director,

Shields & Company, Inc.

Lorne R. Waxlax

Former Executive Vice President,The Gillette Company

* Ofcer of a wholly owned subsidiary of the parent holding company, Clean Harbors, Inc.

Executive Officers & Directors


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Our businesses are subject to significant competition.

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Our businesses are subject to numerous statutory and regulatory requirements, which may increase in the future.

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Future conditions might require us to make substantial write-downs in our assets, which would adversely affect our balance

sheet and results of operations.

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Fluctuations in foreign currency exchange could affect our financial results.

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If we are unable to successfully integrate the businesses and operations of our recent and any future acquisitions and

realize synergies in the expected time frame, our future results would be adversely affected.

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Our acquisitions may expose us to unknown liabilities.

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We assumed significant environmental liabilities as part of past acquisitions and may assume additional such liabilities as

part of future acquisitions. Our financial condition, results of operations and cash flows would be adversely affected if wewere required to pay such liabilities more rapidly or in greater amounts than we now estimate or may estimate in connection

with future acquisitions.

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2011 clh annual report (1)

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