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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________________________________________
FORM 10-K
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                to                                 .
COMMISSION FILE NO. 001-34223
___________________________________________________________________________________________________________
CLEAN HARBORS, INC.
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________________________
Massachusetts
(State or other jurisdiction
of incorporation or organization)
 
04-2997780
(IRS Employer Identification No.)
42 Longwater Drive, Norwell, MA
(Address of principal executive offices)
 
02061-9149
(Zip Code)
Registrant's telephone number: (781) 792-5000
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class:
 
Name of each exchange on which registered:
Common Stock, $.01 par value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o   No ý
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 twelve 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 ý No o 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No ý
On June 30, 2017 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the voting and non-voting common stock of the registrant held by non-affiliates of the registrant was approximately $2.9 billion, based on the closing price of such common stock as of that date on the New York Stock Exchange. Reference is made to Part III of this report for the assumptions on which this calculation is based.
On February 23, 2018, there were outstanding 56,506,765 shares of Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive proxy statement for its 2018 annual meeting of stockholders (which will be filed with the Commission not later than April 30, 2018) are incorporated by reference into Part III of this report.


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CLEAN HARBORS, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2017
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Disclosure Regarding Forward-Looking Statements
In addition to historical information, this annual report contains forward-looking statements, which are generally identifiable by use of the words "believes," "expects," "intends," "anticipates," "plans to," "estimates," "projects," or similar expressions. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report under Item 1A, "Risk Factors," and Item 7, "Management's Discussion and Analysis on Financial Condition and Results of Operations." Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers should also carefully review the risk factors described in other documents which we file from time to time with the Securities and Exchange Commission (the "SEC"), including the quarterly reports on Form 10-Q to be filed by us during 2018.
PART I
ITEM 1.    BUSINESS
General
Clean Harbors, Inc. and its subsidiaries (collectively, "we," "Clean Harbors" or the "Company") is a leading provider of environmental, energy and industrial services throughout North America. We are also the largest re-refiner and recycler of used oil in the world and the largest provider of parts cleaning and related environmental services to commercial, industrial and automotive customers in North America.
Our operations are managed in six operating segments based primarily upon the nature of the various operations and services provided: Technical Services, Industrial Services, Field Services, Safety-Kleen, Oil and Gas Field Services, and Lodging Services.
Technical Services — provides a broad range of hazardous material management services including the packaging, collection, transportation, treatment and disposal of hazardous and non-hazardous waste at our incinerator, landfill, wastewater and other treatment facilities. The business also provides, where possible, recycling, reuse and reclamation services for hazardous and non-hazardous materials—including solvents, precious metals, chemicals, oil, light bulbs, transformers and other electrical equipment.
Industrial and Field Services — by leveraging specialized equipment, expertise, responsiveness and disposal assets across the country, provides turnkey industrial and specialty services such as high-pressure and chemical cleaning, daylighting services, production servicing, decoking, pigging and material processing to refineries, chemical plants, oil sands facilities, pulp and paper mills, and other industrial facilities. These businesses also provide a wide variety of environmental cleanup services on customer sites or other locations on a scheduled or emergency response basis including tank cleaning, decontamination, remediation, and spill cleanup. In performing such services, Clean Harbors is a leader in providing response services for environmental emergencies of any scale on land or water.
Safety-Kleen — provides a broad range of environmental services such as parts cleaning, containerized waste services, used oil collection, and other complementary products and services, including vacuum services, other environmental services and products such as degreasers, glass and floor cleaners, hand cleaners, absorbents, antifreeze, windshield washer fluid, mats and spill kits which we categorize as allied products. In addition, Safety-Kleen manufactures, formulates, packages, blends, distributes and markets high-quality lubricants. We process used oil into high quality base and blended lubricating oils which, through our OilPlusTM closed loop initiative, are then sold to third-party customers, and provide recycling of oil in excess of our current re-refining capacity into recycled fuel oil which is then sold to third parties. Processing into base and blended lubricating oils takes place in our six owned and operated re-refineries, and recycling of oil into recycled fuel oil takes place in one of our used oil terminals.
Oil, Gas and Lodging Services — provides surface rentals, seismic support services, and directional boring services to the energy sector serving oil and gas exploration and power generation. In addition, we provide lodges and remote workforce accommodation facilities throughout Western Canada. These include our open lodges, operator camps, drill camps, manufacturing of modular units and wastewater processing plants.
Clean Harbors, Inc. was incorporated in Massachusetts in 1980 and our principal office is located in Norwell, Massachusetts. We maintain a website at the following Internet address: http://www.cleanharbors.com. Through a link on this website, we provide free access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronic filing with the SEC. Our guidelines on corporate governance, the

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charters for our board committees, and our code of ethics for members of the board of directors, our chief executive officer and our other senior officers are also available on our website, and we will post on our website any waivers of, or amendments to, such code of ethics. Our website and the information contained therein or connected thereto are not incorporated by reference into this annual report.
Health and Safety
Health and Safety is our #1 priority—companywide. Employees at all levels of our Company share this philosophy and are committed to ensuring our safety goals are met. Our commitment to health and safety benefits everyone—our employees, our customers, the community, and the environment. In 2017 we continued with our successful Safety Starts With Me: Live It 3-6-5 program which is a key component in our overall safety program and along with our many other programs has continued to achieve low Total Recordable Incident Rate, or "TRIR;" Days Away, Restricted Activity and Transfer Rate, or "DART;" and Experience Modification Rate, or "EMR." For the year ended December 31, 2017, our Company wide TRIR, DART and EMR were 1.34, 0.80 and 0.58, respectively. For the year ended December 31, 2016, our Company wide TRIR, DART and EMR were 1.18, 0.72 and 0.67, respectively.
In order to protect our employees, continue to lower our incident rates, and satisfy our customers' demands to retain the best service providers with the lowest TRIR, DART and EMR rates, we are fully committed to continuously improving our health and safety performance. All employees recognize the importance of protecting themselves, their fellow employees, their customers, and all those around them from harm. This commitment is supported by the philosophies and Golden Rules of Safety that is the cornerstone of the Safety Starts with Me: Live It 3-6-5 program. Live It 3-6-5 is our dedication to the safety of our workers through each and every employee’s commitment to our three Safety philosophies, our six Golden Rules of Safety and each employee’s five personal reasons why they choose to be safe at work, on the road and at home.
Compliance
We regard compliance with applicable environmental regulations as a critical component of our overall operations. We strive to maintain the highest professional standards in our compliance activities. Our compliance program has been developed for each of our waste management facilities and service centers under the direction of our compliance staff. The compliance staff is responsible for facilities permitting and regulatory compliance, compliance training, transportation compliance, and related record keeping. To ensure the effectiveness of our regulatory compliance program, our compliance staff monitors daily operational activities. We also have an Environmental Health and Safety Compliance Internal Audit Program designed to identify any weaknesses or opportunities for improvement in our ongoing compliance programs. We also perform periodic audits and inspections of the disposal facilities owned by other companies which we utilize.
Our facilities are frequently inspected and audited by regulatory agencies, as well as by customers. Although our facilities have been cited on occasion for regulatory violations, we believe that each of our facilities is currently in substantial compliance with applicable permit requirements.
Strategy
Our strategy is to develop and maintain ongoing relationships with a diversified group of customers that have recurring needs for environmental, energy or industrial services. We strive to be recognized as the premier supplier of a broad range of value-added services based upon quality, responsiveness, customer service, information technologies, breadth of service offerings and cost effectiveness.
The principal elements of our business strategy are to:
Cross-Sell Across Segments—We believe the breadth of our service offerings allows us to provide additional services to existing customers. In particular, we believe we can provide industrial and field services to customers that traditionally have only used our technical services and technical services to customers that use our industrial services or oil and gas field services. At the same time, we see a variety of cross-selling opportunities between our Technical Services, Industrial and Field Services and Safety-Kleen segments. Reflecting this strategy, we have been successfully cross-selling the services of Safety-Kleen, such as parts washers, allied products, recycling services and our OilPlusTM closed loop initiative, to legacy Clean Harbors customers. We believe leveraging our ability to cross-sell across all of our segments will drive additional revenue for our Company.
Capture Large-Scale Projects—We provide turnkey offsite transportation and landfill or incineration disposal services for soil and other contaminated media generated from remediation activities. We also assist remediation contractors and project managers with support services including groundwater disposal, investigation derived waste disposal, rolloff container management, and many other related services. We believe this will drive incremental waste volume to our existing facilities, thereby increasing utilization and enhancing overall profitability.

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Expand Throughput Capacity of Existing Waste Facilities—We operate an extensive network of hazardous waste management facilities and have made substantial investments in these facilities, which provide us with significant operating leverage as volumes increase. In addition, there are opportunities to expand waste handling capacity at these facilities by modifying the terms of the existing permits and by adding equipment and new technology. Through selected permit modifications, we can expand the range of treatment services offered to our customers without the large capital investment necessary to acquire or build new waste management facilities.
Pursue Selective Acquisitions—We actively pursue selective acquisitions in certain services or market sectors where we believe the acquisitions can enhance and expand our business, such as the oil collection and refinery markets. We believe that we can expand existing services, especially in our non-disposal services, through strategic acquisitions in order to generate incremental revenues from existing and new customers and to obtain greater market share. In order to maximize synergies, we rapidly integrate our acquisitions into our existing processes. For additional information on our acquisitions, see "Acquisitions and Divestitures" below.
Execute Strategic Divestitures—To complement our acquisition strategy and focus on internal growth, we regularly review and evaluate our existing operations to determine whether our business model should change through the merger or divestiture of certain businesses. Accordingly, from time to time, we divest certain non-core businesses and reallocate our resources to businesses that we believe better align with our long-term strategic direction. For instance, on June 30, 2017, we completed the sale of our Transformer Services business, which was a non-core business previously included within our Technical Services segment.
Focus on Cost, Pricing and Productivity Initiatives—We continually seek to increase efficiency and to reduce costs through enhanced technology, process efficiencies and stringent expense management. For instance, in 2017, we successfully undertook, in response to current and expected business conditions, headcount reductions, branch consolidations, greater internalization of maintenance costs, procurement and supply chain improvements. Additionally we seek areas in our business where strategic investment in processes, tools and employees can serve to increase productivity, efficiency and safety compliance.
Expand Service Offerings and Geographic Coverage—We believe our Technical Services, Industrial and Field Services, and Safety-Kleen segments have a competitive advantage due to their vast network of locations across North America, particularly in areas where we maintain service locations at or near a treatment, storage and disposal facility, or "TSDF." By opening additional service locations in close proximity to our TSDFs, we believe that we can increase our market share within these segments. We believe this will drive additional waste into our existing facilities, thereby increasing utilization and enhancing overall profitability. In addition, our management team continues to assess the competitive landscape in order to identify new business opportunities.
Acquisitions and Divestitures
Acquisitions are an element of our business strategy that involves expansion through the purchase of businesses that complement our existing company and create multiple opportunities for profitable growth.
On February 23, 2018, we purchased Veolia's US Industrial Cleaning Division, a subsidiary of Veolia Environmental Services ("Veolia"), for a purchase price of approximately $120.0 million, subject to customary post-closing adjustments. The acquisition will provide significant scale and industrial services capabilities while increasing the size of the Company's existing U.S. Industrial Services business.
In 2017, we acquired Lonestar West Inc. ("Lonestar"), a public company headquartered in Alberta, Canada, for approximately CAD $41.8 million, ($33.1 million USD), net of cash acquired. The acquisition price included the assumption of approximately CAD $21.3 million ($16.8 million USD) in outstanding debt, which we subsequently repaid. The acquisition is expected to support our growth in the daylighting and hydro excavation services markets. In addition to increasing the size of our hydro vac fleet, Lonestar's network of locations will provide us with direct access to key geographic markets in both the United States and Canada. The acquired company is included in the Industrial and Field Services segment.
In 2016, we acquired seven businesses for a combined purchase price of $204.8 million, paid in cash and subject to customary post-closing adjustments, which complement our strategy to create a closed loop model as it relates to the sale of our oil products. These acquisitions also provided us three additional oil re-refineries while also expanding our used motor oil collection network and providing greater blending and packaging capabilities. These acquisitions also provided us with greater access to customers in the West Coast region of the United States and additional locations with Part B permits. Operations of these acquisitions are primarily being integrated across our Safety-Kleen segment, with certain operations also being integrated into our Technical Services and Industrial and Field Services segments.
In 2015, we acquired Heckmann Environmental Services, Inc. (“HES”) and Thermo Fluids Inc. (“TFI”), a wholly-owned subsidiary of HES. The acquisition was accomplished through our purchase of all of the issued and outstanding shares of HES

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from Nuverra Environmental Solutions, Inc. HES is a holding company that does not conduct any operations. TFI provides environmental services, including used oil recycling, used oil filter recycling, antifreeze products, parts washers and solvent recycling, and industrial waste management services, including vacuum services, remediation, lab pack and hazardous waste management. We acquired TFI for a purchase price of $79.3 million. The acquisition expanded our environmental services customer base while also complementing the Safety-Kleen network and presence in the western United States.
For additional information relating to our acquisition activities during 2017, 2016 and 2015 and February 2018, see Note 3, "Business Combinations," and Note 21, "Subsequent Events," to our consolidated financial statements included in Item 8 of this report.
Other business transactions also include divestitures based on our ongoing portfolio of assets to determine the extent to which they are contributing to our objectives and growth strategy.
On June 30, 2017, we completed the sale of our Transformer Services business, which was a non-core business previously included with the Technical Services operating segment, for $45.5 million ($43.4 million net of $2.1 million in transactional related costs) subject to customary post-closing adjustments. On September 1, 2016, we completed the sale of our Catalyst Services business, which was a non-core business previously included within the Industrial Services operating segment, for approximately $50.6 million ($49.2 million net of cash retained by the catalyst services business) subject to customary post-closing adjustments. For additional information relating to these divestitures, see Note 4, "Disposition of Businesses," to our consolidated financial statements included in Item 8 of this report.
Protecting the Environment and Corporate Sustainability
Our core business is to provide industry, government and the public a wide range of environmental, energy and industrial services that protect and restore North America's natural environment.
As a leading provider of environmental, energy and industrial services throughout North America, our first goal is to help our customers prevent the release of chemicals and hazardous waste streams into the environment. We also are the leading service provider in the recovery and decontamination of pollutants that have been released. This includes the safe destruction or disposal of hazardous materials in a manner that ensures these materials are no longer a danger to the environment. When providing these services, we are committed to recycling, reuse and reclamation of these wastes whenever possible using a variety of methods more fully explained below in the sections describing our general operations. Many of our branded services exemplify our commitment to sustainability and providing environmental solutions to the marketplace. Where possible, liquids such as solvents, chemicals and used oil are continuously recycled to our high-quality standards and made into useful products. Tolling programs provide a closed process in which the customer’s spent solvents are recycled to their precise specifications and returned directly to them.
We have also become the leading North American provider of services to protect the ozone layer from the destructive effects of chlorofluorocarbons, or "CFCs," which are ozone layer depleting substances and global warming compounds that have global warming potentials up to 10,000 times more powerful than carbon dioxide. Global-warming potential is a relative measure of how much heat a greenhouse gas traps in the atmosphere.
Since 2013, California Air Resources Board has issued over 7,900,000 emission reduction credits that were generated by destroying CFCs at our Arkansas incinerator. Over 7,900,000 metric tons of carbon dioxide emissions were avoided by destroying these greenhouse gases.  That is equivalent to removing over 1,668,745 passenger vehicles from the road for one year.
One of our most highly visible public programs for various governmental and community entities involves the removal of thousands of tons of hazardous wastes, from households throughout the United States and Canada, that might otherwise be improperly disposed of or become dangerous to the communities where they are stored.
As we provide these wide-ranging services throughout North America, we are committed to ensuring that our own operations are environmentally responsible. Our sustainability efforts are guided by a formal policy, strategy and plan and we continue to build on our past efforts, such as implementing numerous energy efficiency improvements and various transportation initiatives within our fleet, including using our own recycled oil.
Competitive Strengths
Leading Provider of Environmental, Energy and Industrial Services—We are a leading provider of environmental, energy and industrial services. We own nine of the 13 commercial hazardous waste incinerators, making us the largest operator of such facilities in North America. We provide multi-faceted and low cost services to a broad mix of customers. We attract and better serve our customers because of our capabilities and the size, scale and geographic location of our assets, which allow us to serve multiple locations.

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Largest Collector and Recycler of Used Motor Oil— As the largest re-refiner and recycler of used oil in the world, we returned during 2017 approximately 190 million gallons of new re-refined oil, lubricants and byproducts back into the marketplace. In 2017, our re-refining process eliminated more than two million metric tons of greenhouse gas ("GHG"), which is the equivalent of growing more than 53 million trees for 10 years in an urban environment or taking over 390,000 passenger cars off the road for one year.
Large and Diversified Customer Base—Our customers range from Fortune 500 companies to midsize and small public and private entities that span multiple industries and business types, including governmental entities. This diversification limits our credit exposure to any one customer and potential cyclicality to any one industry. As a percentage of our 2017 revenues, the top ten industries we service totaled approximately 70% and included chemical (13%), general manufacturing (12%), automotive (9%), refineries and oil sands (9%), government (7%), base oil, blenders and packagers (6%), utilities (5%), terminals and pipelines (3%), pharmaceutical and biotechnology (3%), and transportation (3%).
Stable and Recurring Revenue Base—We have long-standing relationships with our large customers, many of whom have worked with our Company for decades. Our diversified customer base provides stable and recurring revenues, as a significant portion of our revenues are derived from previously served customers with recurring needs for our services. In addition, switching costs for many of our customers are high. This is due to many customers' desire to audit disposal facilities prior to their qualification as approved sites and to limit the number of facilities to which their hazardous wastes are shipped in order to reduce their potential liability under United States and Canadian environmental laws and regulations. We have been selected as an approved vendor by large and small generators of waste because we possess comprehensive collection, recycling, treatment, transportation, disposal, and hazardous waste tracking capabilities and have the expertise necessary to comply with applicable environmental laws and regulations. Those customers that have selected us as an approved vendor typically continue to use our services on a recurring basis.
Comprehensive Service Capabilities—Our comprehensive service offerings allow us to act as a full-service provider to our customers. Our full-service orientation creates incremental revenue growth as customers seek to minimize the number of outside vendors and demand "one-stop shop" service providers.
Integrated Network of Assets—We believe we operate, in the aggregate, the largest number of commercial hazardous waste incinerators, landfills, treatment facilities and TSDFs in North America. Our broad service network enables us to effectively handle a waste stream from origin through disposal and to efficiently direct and internalize our waste streams to reduce costs. As our processing of wastes increases, our size allows us to increase our profit margins as we can internalize a greater volume of waste in our incinerators, landfills and other disposal facilities.
Regulatory Compliance—We continue to make capital investments in our facilities to ensure that they are in compliance with current federal, state, provincial and local regulations. Companies that rely on in-house disposal may find the current regulatory requirements to be too capital intensive or complicated, and may choose to outsource many of their hazardous waste disposal needs.
Effective Cost Management—Our significant scale allows us to maintain low costs through standardized compliance procedures, significant purchasing power, research and development capabilities and our ability to efficiently utilize logistics and transportation to economically direct waste streams to the most efficient facility. We also have the ability to transport and process with internal resources the substantial majority of all hazardous waste that we manage for our customers. In addition, our Safety-Kleen results are significantly impacted by the overall market pricing and product mix associated with base and blended oil products and, more specifically, the market prices of Group II base oils. We also charge stop fees related to our used oil collection services which allow us to effectively manage the profit spreads inherent in the business.
Proven and Experienced Management Team—Our executive management team provides depth and continuity. Our 13 executive officers collectively have over 250 years of experience and expertise in the environmental, energy and industrial services industries. Our chief executive officer founded our Company in 1980, and since its formation has served as both the Chief Executive Officer and Chairman of the Board.
Operations
General
Seasonality and Cyclical Nature of Business. Our operations may be affected by seasonal fluctuations due to weather and budgetary cycles influencing the timing of customers' spending for products and services. Typically during the first quarter of each year there is less demand for our products, oil collection, recycling and environmental services due to the lower levels of activities by our customers as a result of the cold weather, particularly in the Northern and Midwestern regions of the United

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States and Canada. As a result, reduced volumes of waste are received at our facilities, higher operating costs are realized due to sub-freezing weather and high levels of snowfall, factory closings for year-end holidays reduce waste volume, and lower volumes of used oil are generated for our collection.
Geographical Information.    For the year ended December 31, 2017, we generated $2,392.0 million or 81.2% of our revenues in the United States and Puerto Rico, $552.1 million or 18.7% of revenues in Canada, and less than 0.1% of revenues in other international locations. For the year ended December 31, 2016, we generated $2,213.4 million or 80.3% of our revenues in the United States and Puerto Rico, $538.0 million or 19.5% of revenues in Canada, and less than 0.1% of revenues in other international locations. For additional information about the geographical areas from which our revenues are derived and in which our assets are located, see Note 18, "Segment Reporting," to our consolidated financial statements included in Item 8 of this report.
Technical Services
These services involve the collection, transportation, treatment and disposal of hazardous and non-hazardous waste, and include resource recovery, physical treatment, fuel blending, incineration, landfill disposal, wastewater treatment, lab chemical disposal, explosives management and CleanPack® services. Our CleanPack services include the collection, identification and categorization, specialized packaging, transportation and disposal of laboratory chemicals and household hazardous waste. Our technical services are provided through a network of service centers from which a fleet of vehicles are dispatched to pick up customers' waste either on a predetermined schedule or on demand, and to deliver the waste to permitted facilities, which are usually Company-owned. Our service centers also can dispatch chemists to a customer location for collection of chemical and laboratory waste for disposal. InSite Service offerings is a branded on-site/in-plant service delivery program through which we offer a full range of environmental, industrial and waste management services. This signature program is built on safety, quality, efficiency and integrity, and has been offered by Clean Harbors for over 20 years. By leveraging Clean Harbors' expertise and capabilities, our on-site staffs are dedicated to developing the safest, most cost-effective solutions to service customers’ needs.
Collection, Transportation and Logistics Management.    As an integral part of our services, we collect industrial waste from customers and transport such waste to and between our facilities for treatment or bulking for shipment to final disposal locations. Customers typically accumulate waste in containers, such as 55-gallon drums, bulk storage tanks or 20-cubic-yard roll-off containers. In providing this service, we utilize a variety of specially designed and constructed tank trucks and semi-trailers as well as third-party transporters, including railroads.
Treatment and Disposal.    We recycle, treat and dispose of hazardous and non-hazardous industrial waste. The waste handled includes substances which are classified as "hazardous" because of their corrosive, ignitable, infectious, reactive or toxic properties, and other substances subject to federal, state and provincial environmental regulation. We provide final treatment and disposal services designed to manage waste which cannot be otherwise economically recycled or reused. The waste that we handle comes in solid, sludge, liquid and gas form.
We operate a network of TSDFs that collect, temporarily store and/or consolidate compatible waste streams for more efficient transportation to final recycling, treatment or disposal destinations. These facilities hold special permits, such as Part B permits under the Resource Conservation and Recovery Act, or "RCRA," in the United States, which allow them to process, transfer and dispose of waste through various technologies including recycling, incineration, and landfill and wastewater treatment depending on each location's permitted and constructed capabilities.
Resource Recovery and Fuel Blending.    We operate recycling systems for the reclamation and reuse of certain waste, particularly solvent-based waste generated by industrial cleaning operations, metal finishing and other manufacturing processes. Resource recovery involves the treatment of wastes using various methods, which effectively remove contaminants from the original material to restore its fitness for its intended purpose and to reduce the volume of waste requiring disposal.
We also operate a recycling facility that recycles refinery waste and spent catalyst. The recycled oil and catalysts, depending on market conditions, are sold to third parties.
Incineration.    Incineration is the preferred method for the treatment of organic hazardous waste because it effectively destroys the contaminants at high temperatures. High temperature incineration effectively eliminates organic waste such as herbicides, halogenated solvents, pesticides, pharmaceutical and refinery waste, regardless of whether gases, liquids, sludge or solids. Federal and state incineration regulations require a destruction and removal efficiency of 99.99% for most organic waste.
As of December 31, 2017, we had nine active incinerators operating in five incinerator facilities that offer a wide range of technological capabilities to customers. In the United States, we operate a fluidized bed thermal oxidation unit for maximum destruction efficiency of hazardous waste with an estimated annual practical capacity of 58,808 tons and three solids and

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liquids capable incinerator facilities with a combined estimated annual practical capacity of 377,387 tons. We also operate one hazardous waste liquid injection incinerator in Canada with total annual practical capacity of 125,526 tons. Our state-of-the-art hazardous waste incinerator at our El Dorado, Arkansas site, which officially came online in February 2017, added approximately 70,000 tons of additional liquids and solids capacity to our incineration network, which totaled 561,721 tons of capacity at year-end 2017.
Our incinerator facilities in Kimball, Nebraska; Deer Park, Texas; El Dorado, Arkansas; and Aragonite, Utah, are designed to process liquid organic waste, sludge, solids, soil and debris. Our Deer Park facility has two kilns and a rotary reactor. Our El Dorado facility specializes in the treatment of bulk and containerized hazardous liquids, solids and sludge. Our new hazardous waste incinerator at our El Dorado, Arkansas site, specializes in high-temperature incineration of regulated waste, such as industrial and laboratory chemicals, manufacturing byproducts, medical waste, fertilizers and other solid and liquid materials that would otherwise be hazardous to the environment and public health if not properly managed. Our facilities in Kimball and Deer Park have on-site landfills for the disposal of ash produced as a result of the incineration process.
Our incinerator facility in Lambton, Ontario, is a liquid injection incinerator, designed primarily for the destruction of liquid organic waste. Typical waste streams include wastewater with low levels of organics and other higher concentration organic liquid waste not amenable to conventional physical or chemical waste treatment.
Landfills.    Landfills are primarily used for disposal of inorganic waste. In the United States and Canada, we operate nine commercial landfills. Seven of our commercial landfills are designed and permitted for disposal of hazardous waste and two of our landfills are operated for non-hazardous industrial waste disposal and, to a lesser extent, municipal solid waste. In addition to our commercial landfills, we also own and operate two non-commercial landfills that only accept waste from our on-site incinerators.
Of our seven commercial landfills used for disposal of hazardous waste, five are located in the United States and two are located in Canada. As of December 31, 2017, the useful economic lives of these landfills included approximately 26.6 million cubic yards of remaining capacity. This estimate of the useful economic lives of these landfills includes permitted airspace and unpermitted airspace that our management believes to be probable of being permitted based on our analysis of various factors. In addition to the capacity included in the useful economic lives of these landfills, there are approximately 31.9 million cubic yards of additional unpermitted airspace capacity included in the footprints of these landfills that may ultimately be permitted, although there can be no assurance that this additional capacity will be permitted. In addition to the hazardous waste landfills, we operate two non-hazardous industrial landfills with 4.1 million cubic yards of remaining permitted capacity. These two facilities are located in the United States and have been issued operating permits under Subtitle D of RCRA. Our non-hazardous landfill facilities are permitted to accept commercial industrial waste, including waste from foundries, demolition and construction, machine shops, automobile manufacturing, printing, metal fabrications and recycling.
Wastewater Treatment.    We operate nine wastewater treatment facilities that offer a range of wastewater treatment technologies. These wastewater treatment operations involve processing hazardous and non-hazardous waste through use of physical and chemical treatment methods. These facilities treat a broad range of industrial liquid and semi-liquid waste containing heavy metals, organics and suspended solids.
Total Project Management. We also provide total project management services in areas such as chemical packing, on-site waste management, remediation, compliance training and emergency spill response, while leveraging the Clean Harbors network of Technical Services and Industrial and Field Services centers and capabilities.
Industrial and Field Services
Industrial Services. We provide a wide range of industrial maintenance services and specialty industrial services at refineries, mines, upgraders, chemical plants, pulp and paper mills, manufacturing, and power generation facilities. We provide these services throughout North America, which includes our presence in the oil sands region in Alberta, Canada.
Our crews handle as-needed in-plant services to support ongoing in-plant cleaning and maintenance services, including liquid/dry vacuum, hydro-blasting, dewatering and materials processing, water and chemical hauling and steam cleaning. We provide a variety of specialized industrial services including plant outage and turnaround services, decoking and pigging, chemical cleaning, high and ultra-high pressure water cleaning, pipeline inspection and coating services, and large tank and surface impoundment cleaning. We also provide daylighting services which, through the use of specialized hydro vac equipment, deliver safer, cleaner and more precise hydro excavation services to safely uncover highly sensitive underground targets.
Our crews also handle oilfield transport and production services supporting drilling, completions and production programs. On the drilling and completions side, we provide vehicles and services for fluid hauling and disposal for ad hoc and turnkey operations. We also provide services and equipment for drilling site cleanups and support. On the production side, we

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provide complete turnarounds and tank cleaning services. Our downhole well equipment helps maintain and increase well productivity.
Field Services. We provide customers with highly skilled experts who utilize specialty equipment and resources to perform services at any chosen location. Our field service crews and equipment are dispatched on a planned or emergency basis and perform services such as confined space entry for tank cleaning, site decontamination, large remediation projects, demolition, spill cleanup on land and water, railcar cleaning, product recovery and transfer, scarifying and media blasting and vacuum services. Additional services include filtration and water treatment services.
We are also a leader in providing response services for environmental emergencies of any scale from man-made disasters such as oil spills, and natural disasters such as hurricanes.
Safety-Kleen
Our Safety-Kleen service brand offers an array of environmental services and complementary products to a diverse range of customers including automobile repair shops, car and truck dealers, metal fabricators, machine manufacturers, fleet maintenance shops and other automotive, industrial and retail customers.
As the largest provider of parts cleaning services in North America, our Safety-Kleen business offers a complete line of specially designed parts washers to customer locations and then delivers recurring service that includes machine cleaning and maintenance and disposal and replacement of clean solvent or aqueous fluids. We also sell allied products which include degreasers, glass and floor cleaners, hand cleaners, absorbents, antifreeze, windshield washer fluid, mats and spill kits.
Utilizing our collection network, we provide pickup and transportation of hazardous and non-hazardous containerized waste for recycling or disposal, primarily through the Clean Harbors network of recycling and waste treatment and disposal facilities. We also collect used oil which serves as feedstock for our oil re-refineries discussed below, or process the oil into recycled fuel oil, or “RFO,” which is then sold to customers such as asphalt plants, industrial plants, pulp and paper companies, and vacuum gas oil and marine diesel oil producers.
Our vacuum services remove solids, residual oily water and sludge and other fluids from customers' oil/water separators, sumps and collection tanks. We also remove and collect waste fluids found at large and small industrial locations, including metal fabricators, auto maintenance providers, and general manufacturers.
Utilizing used oil collected by Safety-Kleen branches, we manufacture, formulate, package, distribute and market high-quality lubricants. We offer these services direct to business end-users and customers that can in turn market to retailers and end-consumers. The used oil collected by Safety-Kleen's branch network is processed or re-refined to convert into a variety of products, mostly base lubricating oils, and much smaller quantities of asphalt-like material, glycols and fuels. As the largest re-refiner of used oil in North America, we process the used oil collected through our six re-refineries located in East Chicago, Indiana; Newark, California; Wichita, Kansas; Tacoma, Washington; Fallon, Nevada; and Breslau, Ontario. Our primary goal is to produce and sell high-quality blended oils, which are created by combining our re-refined base and other base oils with performance additives in accordance with our proprietary formulations and American Petroleum Institute licenses. Our Performance Plus® brand and “green” proprietary brand EcoPower® sold under our Kleen Performance Products line of oil products are sold to on- and off-road corporate fleets, government entities, automotive service shops and industrial plants, which are serviced through our internal distribution network, as well as an extensive United States and Canada-wide independent distributor network. We also sell unbranded blended oils to distributors that resell them under their private label brands. In late 2016, we implemented our OilPlusTM program resulting in the sale of our renewable oil products directly to our end customers. We sell the base oil that we do not blend and sell ourselves to independent blenders/packagers that use it to blend their own branded or private label oils. With more than 200 million gallons of used oil processed annually, we were able to return in 2017 approximately 190 million gallons of new re-refined oil, lubricants and byproducts back into the marketplace. We believe our position as the largest collector and re-refiner of used motor oil, along with our vast service and distributions network, provide a distinct competitive advantage in our ability to provide our customers with collection and oil distribution services through our OilPlusTM program.
Oil, Gas and Lodging Services
Oil and Gas Field Services. Consists of two lines of businesses; Seismic Services and Surface Rentals. These services support exploration and drilling programs for oil and gas companies.
Seismic Services provides integrated seismic and right-of-way services for efficient resource discovery and site preparation. These services include: (i) seismic surveying that minimizes costs, environmental impact, and time in field; (ii) mulching/line clearing that expedites additional geophysical activities and minimizes environmental impact; and (iii) shot-hole drilling that provides safe and efficient operations in every terrain, including hostile and inaccessible regions.

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Surface Rentals services support oil and gas companies' drilling and well completion programs. Key to our services is our ability to provide solids control to support the drilling process. Our technologies help manage liquids, solids and semi-solid material during the drilling operation, and include centrifuges, tanks, and drilling fluid recovery. We also can provide container rentals for safe collection of drill cuttings and other wastes, as well as manage disposal of drilling fluids and solids. We also supply surface rental equipment to support drill sites by providing wellsite trailers, wastewater treatment systems and holding tanks, light towers, and generators and handling tools.
Lodging Services. Consists of Lodge and mobile Camp Operations and Manufacturing. Synergy is created among all lines of businesses within Lodging Services itself, as well as with other Clean Harbors divisions by providing turnkey remote accommodations and manufacturing support.
Lodge Operations operates fixed lodges ranging in sizes up to approximately 600 beds throughout Western Canada, primarily in the Fort McMurray area. These are open lodges, with amenities that include catering and housekeeping services, fully equipped common areas, fitness rooms and computer rooms, wireless internet and public phones, powered parking stalls, laundry facilities, and daily towel service.
Our mobile Camp operations provide services for remote workforce accommodation facilities throughout Western Canada, currently in British Columbia, Saskatchewan and Alberta, with multiple accommodation types. These include client and open camps, operator camps, and drill camps. In addition, we provide internally to the majority of our lodges and camps food services, hospitality services, camp and lodge managers, and housekeeping. Furthermore, hospitality services are available as a standalone service to clients which have other accommodation arrangements.
Manufacturing operates through our BCT Structures Inc., a custom manufacturer of modular buildings specializing in providing workforce housing, office complexes, schools, lavatories, multi-story buildings, affordable housing, kitchen facilities and other customized modular solutions for various industries.

Competition
The hazardous waste management industry is highly competitive. The sources of competition vary by locality and by type of service rendered, with competition coming from national and regional waste services companies and hundreds of privately-owned firms. Veolia, Waste Management, Inc., or "WM," U.S. Ecology, and Stericycle, Inc. are the principal national firms with which we compete. Each of these competitors is able to provide one or more of the environmental services we offer.
Under federal and state environmental laws in the United States, generators of hazardous wastes remain liable for improper disposal of such wastes. Although generators may hire various companies that have the proper permits and licenses, because of the generators' potential liability, they are very interested in the reputation and financial strength of the companies they use for the management of their hazardous wastes. We believe that our technical proficiency and reputation are important considerations to our customers in selecting and continuing to utilize our services.
We believe that the depth of our recycling, treatment and disposal capabilities and our ability to collect and transport waste products efficiently, quality of service, safety, and pricing are the most significant factors in the market for treatment and disposal services.
For our Technical Services segment, competitors include several major national and regional environmental services firms, as well as numerous smaller local firms. We believe the availability of skilled technical professional personnel, quality of performance, diversity of services, safety record and price are the key competitive factors in this service industry.
For our Industrial and Field Services segment, competitors vary by locality and by type of service rendered, with competition coming from national and regional service providers and hundreds of privately-owned firms that offer energy or industrial services. CEDA International Corporation and Newalta in Canada, and Envirosystems and Hydrochem PSC in the United States, are the principal national firms with which we compete. Each of these competitors is able to provide one or more of the industrial and field services we offer. We believe the availability of specialized equipment, skilled technical professional personnel, quality of performance, diversity of services, safety record and price are the key competitive factors in this industry.
For our Safety-Kleen segment, competitors vary by locality and by type of service rendered, with competition coming from Heritage-Crystal Clean and Veolia, along with several regional and local firms.
For our Oil, Gas and Lodging Services segment, competitors vary by locality and type of services provided, with competition coming from national, regional and local service providers. Some of these competitors are able to provide one or more of the oil and gas field services we offer. Others only provide a limited range of equipment or services tailored for local markets. Competition is based on a number of factors, including safety, quality, performance, reliability, service, price, response

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time, and, in some cases, breadth of service offering. Our primary competitors in our lodging business are Civeo, Black Diamond, Horizon North Logistics, Royal Camps and William Scotsman.
The principal methods of competition for all of our services are quality, price, reliability of service rendered and technical proficiency. We believe that we offer a more comprehensive range of environmental, energy and industrial services than our competitors in major portions of the United States and Canada.
Employees
As of December 31, 2017, we employed approximately 12,700 active full-time employees, of which 805 in the United States and 611 in Canada were represented by labor unions. We believe that our relationship with our employees is satisfactory. As part of our commitment to employee safety and quality customer service, we have an extensive compliance program and trained environmental, health and safety staff. We adhere to a risk management program designed to reduce potential liabilities to us and to our customers.
Intellectual Property
We have invested significantly in the development of proprietary technology and also to establish and maintain an extensive knowledge of leading technologies and incorporate these technologies into the services we offer and provide to our customers. As of December 31, 2017, we held a total of 33 U.S. and nine foreign issued or granted patents (which will expire between 2018 and 2031), two U.S. and five foreign pending patent applications, 78 U.S. and 57 foreign trademark registrations, and four U.S. and nine foreign trademark applications. We also license software and other intellectual property from various third parties. We enter into confidentiality agreements with certain of our employees, consultants and corporate partners, and control access to software documentation and other proprietary information. We believe that we hold adequate rights to all intellectual property used in our business and that we do not infringe upon any intellectual property rights held by other parties.
Management of Risks
We adhere to a program of risk management policies and practices designed to reduce potential liability, as well as to manage customers' ongoing environmental exposures. This program includes installation of risk management systems at our facilities, such as fire suppression, employee training, environmental, auditing and policy decisions restricting the types of wastes handled. We evaluate all revenue opportunities and decline those that we believe involve unacceptable risks.
We dispose of wastes at our incinerator, wastewater treatment and landfill facilities, or at facilities owned and operated by other firms that we have audited and approved. We apply established technologies to treatment, storage and recovery of hazardous wastes. We believe our operations are conducted in a safe and prudent manner and in substantial compliance with applicable laws and regulations.
Insurance and Financial Assurance
Our insurance programs cover the potential risks associated with our multifaceted operations from two primary exposures: direct physical damage and third-party liability. We maintain a casualty insurance program providing coverage for vehicles, employer's liability and commercial general liability in the aggregate amount of $105.0 million, $102.0 million and $102.0 million, respectively, per year, subject to retentions of $2.0 million per occurrence for auto and commercial general liability and $1.0 million for employers' liability in the United States and $2.0 million in Canada. We also have workers' compensation insurance whose limits are established by state statutes.
We have pollution liability insurance policies covering potential risks in three areas: as a contractor performing services at customer sites, as a transporter of waste, and as a processor of waste at our facilities. The contractor's pollution liability insurance has limits of $20.0 million per occurrence and $25.0 million in the aggregate, covering offsite remedial activities and associated liabilities.
For sudden and accidental in-transit pollution liability, our auto liability policy provides the primary $5.0 million per occurrence of transportation pollution insurance. Our pollution liability policies provide an additional $60.0 million per occurrence and $85.0 million in the aggregate for a total of $65.0 million per occurrence and $90.0 million, respectively. A $2.0 million deductible per occurrence applies to this coverage in the United States and Canada.
Federal and state regulations require liability insurance coverage for all facilities that treat, store or dispose of hazardous waste. RCRA, the Toxic Substances Control Act, and comparable state hazardous waste regulations typically require hazardous waste handling facilities to maintain pollution liability insurance in the amount of $1.0 million per occurrence and $2.0 million in the aggregate for sudden occurrences, and $3.0 million per occurrence and $6.0 million in the aggregate for non-sudden occurrences. Our liability insurance coverage meets or exceeds all federal and state regulations.

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Our international operations are insured under locally placed insurance policies that are compulsory in a specific country. In addition, we have a global foreign liability policy that will provide excess and difference in condition coverage in international countries.
Under our insurance programs, coverage is obtained for catastrophic exposures, cyber security as well as those risks required to be insured by law or contract. It is our policy to retain a significant portion of certain expected losses related primarily to employee benefit, workers' compensation, commercial general and vehicle liability. Provisions for losses expected under these programs are recorded based upon our estimates of the actuarial calculation of the aggregate liability for claims. We believe that policy cancellation terms are similar to those of companies in other industries.
Operators of hazardous waste handling facilities are also required by federal, state and provincial regulations to provide financial assurance for closure and post-closure care of those facilities should the facilities cease operation. Closure would include the cost of removing the waste stored at a facility which ceased operating and sending the material to another facility for disposal and the cost of performing certain procedures for decontamination of the facility. As of December 31, 2017, our total estimated closure and post-closure costs requiring financial assurance by regulators were $455.4 million for our U.S. facilities and $39.4 million for our Canadian facilities. We have obtained all of the required financial assurance for our facilities through a combination of surety bonds, funded trusts, letters of credit and insurance from a qualified insurance company. The financial assurance related to closure and post-closure obligations of our U.S. facilities will renew in 2018. Our Canadian facilities utilize surety bonds, which renew at various dates throughout 2018, as well as letters of credit.
Environmental Regulation
While our business has benefited substantially from increased governmental regulation of hazardous waste transportation, storage and disposal, the environmental services industry itself is the subject of extensive and evolving regulation by federal, state, provincial and local authorities. We are required to obtain federal, state, provincial and local permits or approvals for each of our hazardous waste facilities. Such permits are difficult to obtain and, in many instances, extensive studies, tests, and public hearings are required before the approvals can be issued. We have acquired all operating permits and approvals now required for the current operation of our business, and have applied for, or are in the process of applying for, all permits and approvals needed in connection with continued operation and planned expansion or modifications of our operations.
We make a continuing effort to anticipate regulatory, political and legal developments that might affect operations, but are not always able to do so. We cannot predict the extent to which any environmental legislation or regulation that may be enacted or enforced in the future may affect our operations.
United States Hazardous Waste Regulation
Federal Regulations.    The most significant federal environmental laws affecting us are the Resource Conservation and Recovery Act, or "RCRA," the Comprehensive Environmental Response, Compensation and Liability Act, or "CERCLA," also known as the "Superfund Act," the Clean Air Act, the Clean Water Act, and the Toxic Substances Control Act, or "TSCA."
RCRA.    RCRA is the principal federal statute governing hazardous waste generation, treatment, transportation, storage and disposal. Pursuant to RCRA, the EPA has established a comprehensive "cradle-to-grave" system for the management of a wide range of materials identified as hazardous waste. States that have adopted hazardous waste management programs with standards at least as stringent as those promulgated by the EPA have been delegated authority by the EPA to administer their facility permitting programs in lieu of the EPA's program.
Every facility that treats, stores or disposes of hazardous waste must obtain a RCRA permit from the EPA or an authorized state agency unless a specific exemption exists, and must comply with certain operating requirements (the Part B permitting process). RCRA also requires that Part B permits contain provisions for required on-site study and cleanup activities, known as "corrective action," including detailed compliance schedules and provisions for assurance of financial responsibility. See Note 9, "Closure and Post-Closure Liabilities," and Note 10, "Remedial Liabilities," to our consolidated financial statements included in Item 8 of this report for a discussion of our environmental liabilities. See "Insurance and Financial Assurance" above for a discussion of our financial assurance requirements.
The Superfund Act.    The Superfund Act is the primary federal statute regulating the cleanup of inactive hazardous substance sites and imposing liability for cleanup on the responsible parties. It also provides for immediate response and removal actions coordinated by the EPA to releases of hazardous substances into the environment, and authorizes the government to respond to the release or threatened release of hazardous substances or to order responsible persons to perform any necessary cleanup. The statute provides for strict and, in certain cases, joint and several liability for these responses and other related costs, and for liability for the cost of damages to natural resources, to the parties involved in the generation, transportation and disposal of hazardous substances. Under the statute, we may be deemed liable as a generator or transporter

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of a hazardous substance which is released into the environment, or as the owner or operator of a facility from which there is a release of a hazardous substance into the environment. See Note 17, "Commitments and Contingencies," to our consolidated financial statements included in Item 8 of this report for a description of the principal such proceedings in which we are now involved.
The Clean Air Act.    The Clean Air Act was passed by Congress to control the emissions of pollutants into the air and requires permits to be obtained for certain sources of toxic air pollutants such as vinyl chloride, or criteria pollutants, such as carbon monoxide. In 1990, Congress amended the Clean Air Act to require further reductions of air pollutants with specific targets for non-attainment areas in order to meet certain ambient air quality standards. These amendments also require the EPA to promulgate regulations which (i) control emissions of 189 hazardous air pollutants; (ii) create uniform operating permits for major industrial facilities similar to RCRA operating permits; (iii) mandate the phase-out of ozone depleting chemicals; and (iv) provide for enhanced enforcement.
The Clean Water Act.    This legislation prohibits discharge of pollutants into the waters of the United States without governmental authorization and regulates the discharge of pollutants into surface waters and sewers from a variety of sources, including disposal sites and treatment facilities. The EPA has promulgated "pretreatment" regulations under the Clean Water Act, which establish pretreatment standards for introduction of pollutants into publicly owned treatment works. In the course of the treatment process, our wastewater treatment facilities generate wastewater, which we discharge to publicly owned treatment works pursuant to permits issued by the appropriate governmental authorities. We are required to obtain discharge permits and conduct sampling and monitoring programs.
TSCA.    We also operate a network of collection, treatment and field services (remediation) activities throughout North America that are regulated under provisions of TSCA. TSCA established a national program for the management of substances classified as polychlorinated biphenyls, or "PCBs," which include waste PCBs as well as RCRA wastes contaminated with PCBs. The rules set minimum design and operating requirements for storage, treatment and disposal of PCB wastes. Since their initial publication, the rules have been modified to enhance the management standards for TSCA-regulated operations including the decommissioning of PCB transformers and articles, detoxification of transformer oils, incineration of PCB liquids and solids, landfill disposal of PCB solids, and remediation of PCB contamination at customer sites.
Other Federal Laws.    In addition to regulations specifically directed at our transportation, storage, and disposal facilities, there are a number of regulations that may "pass-through" to the facilities based on the acceptance of regulated waste from affected client facilities. Each facility that accepts affected waste must comply with the regulations for that waste, facility or industry. Examples of this type of regulation are National Emission Standards for Benzene Waste Operations and National Emissions Standards for Pharmaceuticals Production. Each of our facilities addresses these regulations on a case-by-case basis determined by its ability to comply with the pass-through regulations.
In our transportation operations, we are regulated by the U.S. Department of Transportation, the Federal Railroad Administration, the Federal Aviation Administration and the U.S. Coast Guard, as well as by the regulatory agencies of each state in which we operate or through which our vehicles pass.
Health and safety standards under the Occupational Safety and Health Act, or "OSHA," are also applicable to all of our operations.
State and Local Regulations. Pursuant to the EPA's authorization of their RCRA equivalent programs, a number of U.S. states have regulatory programs governing the operations and permitting of hazardous waste facilities. Accordingly, the hazardous waste treatment, storage and disposal activities of a number of our facilities are regulated by the relevant state agencies in addition to federal EPA regulation.
Some states classify as hazardous some wastes that are not regulated under RCRA. For example, Massachusetts considers used oil as "hazardous waste" while RCRA does not. Accordingly, we must comply with state requirements for handling state regulated wastes, and, when necessary, obtain state licenses for treating, storing, and disposing of such wastes at our facilities.
Our facilities are regulated pursuant to state statutes, including those addressing clean water and clean air. Local sewer discharge and flammable storage requirements are applicable to certain of our facilities. Our facilities are also subject to local siting, zoning and land use restrictions. We believe that each of our facilities is in substantial compliance with the applicable requirements of federal and state licenses which we have obtained. Once issued, such licenses have maximum fixed terms of a given number of years, which differ from state to state, ranging from three to ten years. The issuing state agency may review or modify a license at any time during its term. We anticipate that once a license is issued with respect to a facility, the license will be renewed at the end of its term if the facility's operations are in compliance with applicable requirements. However, there can be no assurance that regulations governing future licensing will remain static, or that we will be able to comply with such requirements.

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Canadian Hazardous Waste Regulation
In Canada, the provinces retain control over environmental issues within their boundaries and thus have the primary responsibility for regulating management of hazardous wastes. The federal government regulates issues of national scope or where activities cross provincial boundaries.
Provincial Regulations.    Most of Canada's industrial development and the major part of its population are located in four provinces: Ontario, Quebec, Alberta and British Columbia. These provinces have the most detailed environmental regulations. We operate major waste management facilities in each of these provinces, as well as waste transfer facilities in Nova Scotia and Manitoba.
The main provincial acts dealing with hazardous waste management are:
Ontario—Environmental Protection Act;
Quebec—Environmental Quality Act;
Alberta—Environmental Protection and Enhancement Act; and
British Columbia—Waste Management Act.
These pieces of legislation were developed by the provinces independently and, among other things, generally control the generation, characterization, transport, treatment and disposal of hazardous wastes. Regulations developed by the provinces under the relevant legislation are also developed independently, but are often quite similar in effect and sometimes in application. For example, there is some uniformity in manifest design and utilization.
Provincial legislation also provides for the establishment of waste management facilities. In this case, the facilities are also controlled by provincial statutes and regulations governing emissions to air, groundwater and surface water and prescribing design criteria and operational guidelines.
Waste transporters require a permit to operate under provincial waste management regulations and are subject to the requirements of the Federal Transportation of Dangerous Goods legislation. They are required to report the quantities and disposition of materials shipped.
Canadian Federal Regulations.    The Canadian federal government has authority for those matters which are national in scope and in impact and for Canada's relations with other nations. The main federal laws governing hazardous waste management are:
Canadian Environmental Protection Act (1999) ("CEPA 99"), and
Transportation of Dangerous Goods Act.
Environment Canada is the federal agency with responsibility for environmental matters and the main legislative instrument is the Canadian Environmental Protection Act. This act charges Environment Canada and Health Canada with protection of human health and the environment and seeks to control the production, importation and use of substances in Canada and to control their impact on the environment.
The Export and Import of Hazardous Wastes Regulations under CEPA 99 control the export and import of hazardous wastes and hazardous recyclable materials. By reference, these regulations incorporate the Transportation of Dangerous Goods Act and Regulations, which address identification, packaging, marking and documentation of hazardous materials during transport. CEPA 99 requires that anyone proposing to export or import hazardous wastes or hazardous recyclable materials or to transport them through Canada notify the Minister of the Environment and obtain a permit to do so. Section 9 of CEPA 99 allows the federal government to enter into administrative agreements with the provinces and territories for the development and improvement of environmental standards. These agreements represent cooperation towards a common goal rather than a delegation of authority under CEPA 99. To facilitate the development of provincial and territorial agreements, the federal, provincial and territorial governments participate in the Canadian Council of Ministers of the Environment ("CCME"). The CCME comprises the 14 environment ministers from the federal, provincial and territorial governments, who normally meet twice a year to discuss national environmental priorities and to determine work to be carried out under the auspices of the CCME.
Canadian Local and Municipal Regulations.    Local and municipal regulations seldom reference direct control of hazardous waste management activities. Municipal regulations and by-laws, however, control such issues as land use designation, access to municipal services and use of emergency services, all of which can have a significant impact on facility operation.

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Compliance with Environmental Regulations
We incur costs and make capital investments in order to comply with the previously discussed environmental regulations. These regulations require that we remediate contaminated sites, operate our facilities in accordance with enacted regulations, obtain required financial assurance for closure and post-closure care of our facilities should such facilities cease operations, and make capital investments in order to keep our facilities in compliance with environmental regulations.
As further discussed in Note 9, "Closure and Post-Closure Liabilities," and Note 10, "Remedial Liabilities," to our consolidated financial statements included in Item 8 of this report, we have accrued environmental liabilities as of December 31, 2017, of $185.5 million. For the years ended December 31, 2017 and 2016, we spent $13.0 million and $12.2 million, respectively, to address environmental liabilities.
As discussed more fully above under the heading "Insurance and Financial Assurance," we are required to provide financial assurance with respect to certain statutorily required closure, post-closure and corrective action obligations at our facilities. We have placed the required financial assurance primarily through a qualified insurance company.
As described in Note 17, "Commitments and Contingencies," to our consolidated financial statements included in Item 8 of this report, we are involved in legal proceedings arising under environmental laws and regulations. Alleged failure to comply with laws and regulations may lead to the imposition of fines or the denial, revocation or delay of the renewal of permits and licenses by governmental entities. In addition, such governmental entities, as well as surrounding landowners, may claim that we are liable for environmental damages. Citizens groups have become increasingly active in challenging the grant or renewal of permits and licenses for hazardous waste facilities, and responding to such challenges has further increased the costs associated with establishing new facilities or expanding current facilities. A significant judgment against us, the loss of a significant permit or license, or the imposition of a significant fine could have a material effect on our business and future prospects.
ITEM 1A.    RISK FACTORS
An investment in our securities involves certain risks, including those described below. You should consider carefully these risk factors together with all of the information included in this report before investing in our securities.
Risks Affecting All of Our Businesses
Our businesses are subject to operational and safety risks.
Provision of environmental, energy and industrial services to our customers by all four of our business segments involves risks such as equipment defects, malfunctions and failures, and natural disasters, which could potentially result in releases of hazardous materials, injury or death of our employees, or a need to shut down or reduce operation of our facilities while remedial actions are undertaken. Our employees often work under potentially hazardous conditions. These risks expose us to potential liability for pollution and other environmental damages, personal injury, loss of life, business interruption, and property damage or destruction. We must also maintain a solid safety record in order to remain a preferred supplier to our major customers.
While we seek to minimize our exposure to such risks through comprehensive training programs, vehicle and equipment maintenance programs, and insurance, such programs and insurance may not be adequate to cover all of our potential liabilities and such insurance may not in the future be available at commercially reasonable rates. If we were to incur substantial liabilities in excess of policy limits or at a time when we were not able to obtain adequate liability insurance on commercially reasonable terms, our business, results of operations and financial condition could be adversely affected to a material extent. Furthermore, should our safety record deteriorate, we could be subject to a potential reduction of revenues from our major customers.
Our businesses are subject to numerous statutory and regulatory requirements, which may increase in the future.
Our businesses are subject to numerous statutory and regulatory requirements, and our ability to continue to hold licenses and permits required for our businesses is subject to maintaining satisfactory compliance with such requirements. These requirements may increase in the future as a result of statutory and regulatory changes. Although we are very committed to compliance and safety, we may not, either now or in the future, be in full compliance at all times with such statutory and regulatory requirements. Consequently, we could be required to incur significant costs to maintain or improve our compliance with such requirements.

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Failure to effectively manage acquisitions and divestitures could adversely impact our future results.
We continuously evaluate potential acquisition candidates and from time to time acquire companies that we believe will strategically fit into our business and growth objectives. In particular, we acquired in 2016 seven businesses for approximately $204.8 million and in 2017 four businesses for approximately $51.9 million, all subject to customary post-closing adjustments, and in February 2018 we acquired an industrial services business for a purchase price of approximately $120.0 million, subject to customary post-closing adjustments. If we are unable to successfully integrate and develop acquired businesses, we could fail to achieve anticipated synergies and cost savings, including any expected increases in revenues and operating results, which could have a material adverse effect on our financial results. We also continually review our portfolio of assets to determine the extent to which they are contributing to our objectives and growth strategy. In particular, we divested, in September 2016 our Catalyst Services business for approximately $50.6 million ($49.2 million net of cash divested) and in June 2017 our Transformer Services business for approximately $45.5 million, both subject to customary post-closing adjustments.
Our acquisitions may expose us to unknown liabilities.
Because we have acquired, and expect generally to acquire, all the outstanding shares of most of our acquired companies, our investment in those companies are or will be subject to all of their liabilities other than their respective debts which we paid or will pay at the time of the acquisitions. If there are unknown liabilities or other obligations, our business could be materially affected. We may also experience issues relating to internal controls over financial reporting that could affect our ability to comply with the Sarbanes-Oxley Act, or that could affect our ability to comply with other applicable laws.
A cyber security incident could negatively impact our business and our relationships with customers.
We use computers in substantially all aspects of our business operations and also mobile devices and other online activities to connect with our employees and customers. Such uses give rise to cyber security risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and/or confidential information and intellectual property including, but not limited to, private information about employees, and financial and strategic information about our Company and our business partners. Furthermore, as we pursue our strategy to grow through acquisitions and new initiatives that improve our operations and cost structure, we are also expanding and improving our information technologies, resulting in a larger technological presence and corresponding exposure to cyber security risk. If we fail to assess and identify cyber security risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks. Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures and incident response efforts may not be entirely effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage.
Fluctuations in foreign currency exchange could affect our financial results.
We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar. In fiscal 2017, we recorded approximately 19% of our revenues outside of the United States, primarily in Canada. Because our consolidated financial statements are presented in U.S. dollars, we must translate revenues, income and expenses as well as assets and liabilities into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other currencies in countries where we operate will affect our results of operations and the value of balance sheet items denominated in foreign currencies.
Certain adverse conditions have required, and future conditions might require, us to make substantial write-downs in our assets, which have adversely affected or would adversely affect our balance sheet and results of operations.
We review our long-lived tangible and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We also test our goodwill and indefinite-lived intangible assets for impairment at least annually on December 31, or when events or changes in the business environment indicate that the carrying value of a reporting unit may exceed its fair value. Based on those results, during the third quarter of 2016, we determined that the then carrying amount of our Lodging Services reporting unit exceeded the estimated fair value of that unit and we therefore then recognized a goodwill impairment charge of $34.0 million with respect to that unit. During and as of the end of each of 2017 and 2016, we determined that no additional asset write-downs were required. However, if conditions in any of the businesses in which we compete were to deteriorate, we could determine that certain of our assets were impaired and we would then be required to write-off all or a portion of our costs for such assets. Any significant write-offs would adversely affect our balance sheet and results of operations.

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Natural disasters or other catastrophic events could negatively affect our business, financial condition and results of operations.
Natural disasters such as hurricanes, typhoons or earthquakes could negatively affect our operations and financial performance. Such events could result in physical damage to one or more of our facilities or equipment, the temporary lack of an adequate work force in a market, and the temporary disruption in rail or truck transportation services which we rely on to deliver waste to our facilities. These events could prevent or delay shipments and reduce both volumes and revenue. Weather conditions and other event driven special projects also cause interim variations in our results. We may be required to suspend operations in some or all of our locations, which could have a material adverse effect on our business, financial condition and results of operation.

Additional Risks of Our Technical Services Business
The hazardous waste management business which our Technical Services segment conducts is subject to significant environmental liabilities.
We have accrued environmental liabilities valued as of December 31, 2017, at $185.5 million, substantially all of which we assumed in connection with certain acquisitions. We calculate our environmental liabilities on a present value basis in accordance with generally accepted accounting principles, which take into consideration both the amount of such liabilities and the timing when we project that we will be required to pay such liabilities. We anticipate our environmental liabilities will be payable over many years and that cash flows generated from our operations will generally be sufficient to fund the payment of such liabilities when required. However, events not now anticipated (such as future changes in environmental laws and regulations or their enforcement) could require that such payments be made earlier or in greater amounts than we now estimate, which could adversely affect our financial condition and results of operations.
We may also assume additional environmental liabilities as part of future acquisitions. Although we will endeavor to accurately estimate and limit environmental liabilities presented by the businesses or facilities to be acquired, some liabilities, including ones that may exist only because of the past operations of an acquired business or facility, may prove to be more difficult or costly to address than we then estimate. It is also possible that government officials responsible for enforcing environmental laws may believe an environmental liability is more significant than we then estimate, or that we will fail to identify or fully appreciate an existing liability before we become legally responsible to address it.
If we become unable to obtain at reasonable cost the insurance, surety bonds, letters of credit and other forms of financial assurance required for our facilities and operations, our business and results of operations would be adversely affected.
We are required to provide substantial amounts of financial assurance to governmental agencies for closure and post-closure care of our licensed hazardous waste treatment facilities should those facilities cease operation, and we are also occasionally required to post surety, bid and performance bonds in connection with certain projects. As of December 31, 2017, our total estimated closure and post-closure costs requiring financial assurance by regulators were $455.4 million for our U.S. facilities and $39.4 million for our Canadian facilities. We have obtained all of the required financial assurance for our facilities through a combination of surety bonds, funded trusts, letters of credit and insurance from a qualified insurance company. The financial assurance related to closure and post-closure obligations of our U.S. facilities will renew in 2017. Our Canadian facilities utilize surety bonds, which renew at various dates throughout 2017, as well as letters of credit.
Our ability to continue operating our facilities and conducting our other operations would be adversely affected if we became unable to obtain sufficient insurance, surety bonds, letters of credit and other forms of financial assurance at reasonable cost to meet our regulatory and other business requirements. The availability of insurance, surety bonds, letters of credit and other forms of financial assurance is affected by our insurers', sureties' and lenders' assessment of our risk and by other factors outside of our control such as general conditions in the insurance and credit markets.
The hazardous waste management industry in which we participate is subject to significant economic and business risks.
The future operating results of our Technical Services segment may be affected by such factors as our ability to utilize our facilities and workforce profitably in the face of intense price competition, maintain or increase market share in an industry which has in the past experienced significant downsizing and consolidation, realize benefits from cost reduction programs, invest in new technologies for treatment of hazardous waste, generate incremental volumes of waste to be handled through our facilities from existing and acquired sales offices and service centers, obtain sufficient volumes of waste at prices which produce revenue sufficient to offset the operating costs of our facilities, minimize downtime and disruptions of operations, and develop our field services business. In particular, economic downturns or recessionary conditions in North America, and increased outsourcing by North American manufacturers to plants located in countries with lower wage costs and less stringent

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environmental regulations, have adversely affected and may in the future adversely affect the demand for our services. Our Technical Services business is also cyclical to the extent that it is dependent upon a stream of waste from cyclical industries such as chemical and petrochemical. If those cyclical industries slow significantly, the business that we receive from them would likely decrease.
The extensive environmental regulations to which we are subject may increase our costs and potential liabilities and limit our ability to expand our facilities.
Our operations and those of others in the environmental services industry are subject to extensive federal, state, provincial and local environmental requirements in both the United States and Canada, including those relating to emissions to air, discharged wastewater, storage, treatment, transport and disposal of regulated materials, and cleanup of soil and groundwater contamination. In particular, if we fail to comply with governmental regulations governing the transport of hazardous materials, such failure could negatively impact our ability to collect, process and ultimately dispose of hazardous wastes generated by our customers. While increasing environmental regulation often presents new business opportunities for us, it often also results in increased operating and compliance costs. Efforts to conduct our operations in compliance with all applicable laws and regulations, including environmental rules and regulations, require programs to promote compliance, such as training employees and customers, purchasing health and safety equipment, and in some cases hiring outside consultants and lawyers. Even with these programs, we and other companies in the environmental services industry are routinely faced with governmental enforcement proceedings, which can result in fines or other sanctions and require expenditures for remedial work on waste management facilities and contaminated sites. Certain of these laws impose strict and, under certain circumstances, joint and several liability on current and former owners and operators of facilities that release regulated materials or that generate those materials and arrange for their disposal or treatment at contaminated sites. Such liabilities can relate to required cleanup of releases of regulated materials and related natural resource damages.
From time to time, we have paid fines or penalties in governmental environmental enforcement proceedings, usually involving our waste treatment, storage and disposal facilities. Although none of these fines or penalties that we have paid in the past has had a material adverse effect upon us, we might in the future be required to make substantial expenditures as a result of governmental proceedings which would have a negative impact on our earnings. Furthermore, regulators have the power to suspend or revoke permits or licenses needed for operation of our plants, equipment, and vehicles based on, among other factors, our compliance record, and customers may decide not to use a particular disposal facility or do business with us because of concerns about our compliance record. Suspension or revocation of permits or licenses would impact our operations and could have a material impact on our financial results. Although we have never had any of our facilities' operating permits revoked, suspended or non-renewed involuntarily, it is possible that such an event could occur in the future.
Some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. In the past, practices have resulted in releases of regulated materials at and from certain of our facilities, or the disposal of regulated materials at third-party sites, which may require investigation and remediation, and potentially result in claims of personal injury, property damage and damages to natural resources. In addition, we occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities might trigger compliance requirements that are not applicable to operating facilities. We are currently conducting remedial activities at certain of our facilities and paying a portion of the remediation costs at certain sites owned by third parties. While, based on available information, we believe these remedial activities will not result in a material effect upon our operations or financial condition, these activities or the discovery of previously unknown conditions could result in material costs.
In addition to the costs of complying with environmental laws and regulations, we incur costs defending against environmental litigation brought by governmental agencies and private parties. We are now, and may in the future be, a defendant in lawsuits brought by parties alleging environmental damage, personal injury, and/or property damage, which may result in our payment of significant amounts.
Environmental and land use laws also impact our ability to expand our facilities. In addition, we are required to obtain governmental permits to operate our facilities, including all of our landfills. Even if we comply with all applicable environmental laws, we might not be able to obtain requisite permits from applicable governmental authorities to extend or modify such permits to fit our business needs.
If our assumptions relating to expansion of our landfills should prove inaccurate, our results of operations and cash flow could be adversely affected.
When we include expansion airspace in our calculation of available airspace, we adjust our landfill liabilities to the present value of projected costs for cell closure and landfill closure and post-closure. It is possible that our estimates or

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assumptions could ultimately turn out to be significantly different from actual results. In some cases we may be unsuccessful in obtaining an expansion permit or we may determine that an expansion permit that we previously thought was probable has become unlikely. To the extent that such estimates, or the assumptions used to make those estimates, prove to be significantly different than actual results, or our belief that we will receive an expansion permit changes adversely in a significant manner, our landfill assets, including the assets incurred in the pursuit of the expansion, may be subject to impairment testing. Furthermore, lower prospective profitability may result due to increased interest accretion and depreciation or asset impairments related to the removal of previously included expansion airspace. In addition, if our assumptions concerning expansion airspace should prove inaccurate, certain of our cash expenditures for closure of landfills could be accelerated and adversely affect our results of operations and cash flow.
Additional Risks of Our Industrial and Field Services Business
A significant portion of our Industrial and Field Services business depends upon the demand for cleanup of major spills and other remedial projects and regulatory developments over which we have no control.
Our operations can be affected by the commencement and completion of cleanup of major spills and other events, customers' decisions to undertake remedial 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 regulations governing the management of hazardous waste, secular changes in the waste processing industry towards waste minimization and the propensity for delays in the demand for remedial services, and changes in the myriad of governmental regulations governing our diverse operations. We do not control such factors and, as a result, our revenue and income can vary from quarter to quarter, and past financial performance for certain quarters may not be a reliable indicator of future performance for comparable quarters in subsequent years.
Additional Risks of Our Safety-Kleen Business
Fluctuations in oil prices may negatively affect our Safety-Kleen business.
A significant portion of our Safety-Kleen business involves collecting used oil from certain of our customers, re-refining a portion of such used oil into base and blended lubricating oils, and then selling both such re-refined oil and the recycled oil, or ‘‘RFO,’’ to other customers. Changes in the reported spot market prices of oil affect the prices at which we can sell our re-refined oil and RFO. If applicable rates increase or decrease, we typically will charge a higher or lower corresponding price for our re-refined oil and RFO. The price at which we sell our re-refined oil and RFO is also affected by changes in certain indices measuring changes in the price of heavy fuel oil, with increases and decreases in the indices typically translating into a higher or lower price for our RFO. The cost to collect used oil, including the amounts we pay to obtain a portion of our used oil and therefore ability to collect necessary volumes and the fuel costs of our oil collection fleet, typically also increases or decreases when the relevant indices increase or decrease. However, even though the prices we can charge for our re-refined oil and RFO and the costs to collect and re-refine used oil and process RFO typically increase and decrease together, there is no assurance that when our costs to collect and re-refine used oil and process RFO increase we will be able to increase the prices we charge for our re-refined oil and RFO to cover such increased costs, or that our costs to collect and re-refine used oil and process RFO will decline when the prices we can charge for re-refined oil and RFO decline. These risks are exacerbated when there are rapid fluctuations in these oil indices.
Environmental laws and regulations have adversely affected and may adversely affect Safety-Kleen's parts cleaning and other solvent related services.
In connection with its parts cleaning and other solvent related services, Safety-Kleen has been subject to fines and certain orders requiring it to take environmental remedial action. Safety-Kleen may also be subject to monetary fines, civil or criminal penalties, remediation, cleanup or stop orders, injunctions, orders to cease or suspend certain practices or denial of permits required for the operation of its facilities. The outcome of any proceeding and associated costs and expenses could have a material adverse impact on Safety-Kleen’s financial condition and results of operations.
Recent and potential changes in environmental laws and regulations may also adversely affect future Safety-Kleen parts cleaning and other solvent related services. Interpretation or enforcement of existing laws and regulations, or the adoption of new laws and regulations, may require Safety-Kleen to modify or curtail its operations or replace or upgrade its facilities or equipment at substantial cost, which we may not be able to pass on to our customers, and we may choose to indemnify our customers from any fines or penalties they may incur as a result of these new laws and regulations. On the other hand, in some cases if new laws and regulations are less stringent, Safety-Kleen’s customers or competitors may be able to manage waste more effectively themselves, which could decrease the need for Safety-Kleen’s services or increase competition, which could adversely affect Safety-Kleen’s results of operations.


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Safety-Kleen is subject to existing and potential product liability lawsuits.
Safety-Kleen has been named from time to time as a defendant in product liability lawsuits in various courts and jurisdictions throughout the United States. As of December 31, 2017, Safety-Kleen was involved in approximately 52 such proceedings (including cases which have been settled but not formally dismissed) wherein persons claim personal injury resulting from the use of its parts cleaning equipment or cleaning products. These proceedings typically involve allegations that the solvents used in Safety-Kleen’s parts cleaning equipment contain contaminants or that Safety-Kleen’s recycling process does not effectively remove the contaminants that become entrained in the solvents during their use. In addition, certain claimants assert that Safety-Kleen failed to adequately warn the product user of potential risks, including a historic failure to warn that such solvents contain trace amounts of toxic or hazardous substances such as benzene. Although Safety-Kleen maintains insurance that we believe will provide coverage for these claims (over amounts accrued for self-insured retentions and deductibles in certain limited cases), this insurance may not provide coverage for potential awards of punitive damages against Safety-Kleen. Although Safety-Kleen has vigorously defended and will continue to vigorously defend itself and the safety of its products against all of these claims, these lawsuits are subject to many uncertainties and outcomes cannot be predicted with assurance. Safety-Kleen may also be named in similar additional lawsuits in the future, including claims for which insurance coverage may not be available. If any one or more of these lawsuits were decided unfavorably against Safety-Kleen and the plaintiffs were awarded punitive damages, or if insurance coverage were not available for any such claim, our financial condition and results of operations could be materially and adversely affected. Additionally, if any one or more of these lawsuits were decided unfavorably against Safety-Kleen, such outcome may encourage more lawsuits against us.
Safety-Kleen is dependent on third parties for manufacturing the majority of its equipment.
Safety-Kleen does not manufacture the majority of the equipment, including parts washers, that Safety-Kleen places at customer sites. Accordingly, Safety-Kleen relies on a limited number of third-party suppliers for manufacturing this equipment. The supply of third-party equipment could be interrupted or halted by a termination of Safety-Kleen’s relationships, a failure of quality control or other operational problems at such suppliers or a significant decline in their financial condition. If Safety-Kleen were not able to retain these providers or obtain its requests from them, Safety-Kleen may not be able to obtain alternate providers in a timely manner or on economically attractive terms and, as a result, Safety-Kleen may not be able to compete successfully for new business, complete existing engagements profitably or retain its existing customers. Additionally, if Safety-Kleen’s third-party suppliers provide defective equipment, Safety-Kleen may be subject to reputational damage or product liability claims which may negatively impact its reputation, financial condition and results of operations. Further, Safety-Kleen generally does not have long-term contracts with its third-party suppliers, and as a result those suppliers may increase the price of the equipment they provide, which may hurt Safety-Kleen’s results of operations.
Additional Risks of Our Oil, Gas and Lodging Services Businesses
A large portion of our Oil and Gas Field Services and Lodging Services businesses are dependent on the oil and gas industry in Western Canada, and declines in oil and gas investment and exploration in that region have adversely affected and could in the future adversely affect our business.
Our Oil and Gas Field Services and Lodging Services businesses generate a significant portion of their total revenues from customers in the oil and gas industry operating in Western Canada, although a majority of the services we provide to such customers relate to oil and gas refining which is less volatile than oil and gas exploration. Accordingly, declines in the general level of oil and gas investment and exploration in Western Canada have had and could potentially have significant adverse effects on the revenues and profitability of these businesses. Such declines have occurred and could potentially occur in the future if reductions in the commodity prices of oil and gas result in reduced oil and gas investment and exploration and refining. Such declines could also be triggered by technological and regulatory changes, such as those affecting the availability and cost of alternative energy sources and other changes in industry and worldwide economic and political conditions.
Many of our major customers conduct a significant portion of their operations in the Alberta oil sands. The Alberta oil sands contain large oil deposits, but extraction may involve significantly greater cost and environmental concerns than conventional drilling. While we believe our major involvement in the oil sands region will provide future growth opportunities, such involvement also increases the risk that our business will be adversely affected if future economic activity in the Alberta oil sands were to further decline. Major factors that could cause such a decline might include a prolonged reduction in the commodity price of oil and future changes in environmental restrictions and regulations. The downturn in worldwide economic conditions and in the commodity price of oil and gas which has occurred in recent years and continues to occur has caused certain of our customers to delay a number of large projects in the planning and early development phases within the oil sands region. In addition, customers are revisiting their operating budgets and challenging their suppliers to reduce costs and achieve better efficiencies in their work programs.

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All of our major Canadian lodges are located on land subject to leases; if we were unable to renew a lease, we could be materially and adversely affected.
     All of our major Canadian lodges are located on land subject to leases. Accordingly, while we own the accommodations assets and can move them to other locations, if necessary, we only own a leasehold in those properties. If we were found to be in breach of a lease, we could lose the right to use the property. In addition, unless we can extend the terms of these leases before their expiration, we would lose our right to operate our facilities located on these properties upon expiration of the leases. In that event, we would be required to remove our accommodations assets and remediate the sites. We may not be able to renew our leases upon expiration on similar terms, or at all, and if we were unable to renew leases on similar terms, it may have an adverse effect on our business. In addition, if we were to lose the right to use a lodge due to non-renewal of a lease, we would be unable to derive income from such lodge, which could materially and adversely affect us.
Risks Relating to Our Levels of Debt and Letters of Credit
Our substantial levels of outstanding debt and letters of credit could adversely affect our financial condition and ability to fulfill our obligations.
As of December 31, 2017, we had outstanding $1.2 billion of senior unsecured notes, $398.0 million of senior secured term loan, and $134.1 million of letters of credit. Our substantial levels of outstanding debt and letters of credit may:
adversely impact our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other general corporate purposes or to repurchase our senior unsecured notes from holders upon any change of control;
require us to dedicate a substantial portion of our cash flow to payment of interest on our debt and fees on our letters of credit, which reduces the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
subject us to the risk of increased sensitivity to interest rate increases based upon variable interest rates, including our senior secured term loan and borrowings (if any) under our revolving credit facility;
increase the possibility of an event of default under the financial and operating covenants contained in our debt instruments; and
limit our ability to adjust to rapidly changing market conditions, reduce our ability to withstand competitive pressures and make us more vulnerable to a downturn in general economic conditions of our business than our competitors with less debt.
Our ability to make scheduled payments of principal or interest with respect to our debt, including our outstanding senior unsecured notes, our secured term loan, any revolving loans and our capital leases, and to pay fee obligations with respect to our letters of credit, will depend on our ability to generate cash and our future financial results. If we were unable to generate sufficient cash flow from operations in the future to service our debt and letter of credit fee obligations, we might be required to refinance all or a portion of our existing debt and letter of credit facilities or to obtain new or additional such facilities. However, we might not be able to obtain any such new or additional facilities on favorable terms or at all.
Despite our substantial levels of outstanding debt and letters of credit, we could incur substantially more debt and letter of credit obligations in the future.
Although our revolving credit agreement and the indentures and loan agreement governing our other outstanding debt contain restrictions on the incurrence of additional debt (including, for this purpose, reimbursement obligations under outstanding letters of credit), these restrictions are subject to a number of qualifications and exceptions and the additional debt which we might incur in the future in compliance with these restrictions could be substantial. In particular, we had available at December 31, 2017, up to an additional approximately $217.8 million for additional borrowings and letters of credit under our revolving credit facility. Our revolving credit agreement and the indentures and loan agreement governing our other outstanding debt also allow us to borrow significant amounts of money from other sources. These restrictions also do not prevent us from incurring obligations (such as operating leases) that do not constitute “debt” or “indebtedness” as defined in the relevant agreements. To the extent we incur in the future additional debt and letter of credit or other obligations, the related risks would increase.
The covenants in our debt agreements restrict our ability to operate our business and might lead to a default under our debt agreements.
Our revolving credit agreement and the indentures and loan agreement governing our other outstanding debt limit, among

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other things, our ability and the ability of our restricted subsidiaries to:
incur or guarantee additional indebtedness (including, for this purpose, reimbursement obligations under letters of credit) or issue preferred stock;
pay dividends or make other distributions to our stockholders;
purchase or redeem capital stock or subordinated indebtedness;
make investments;
create liens;
incur restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;
sell assets, including capital stock of our subsidiaries;
consolidate or merge with or into other companies or transfer all or substantially all of our assets; and
engage in transactions with affiliates.
As a result of these covenants, we may not be able to respond to changes in business and economic conditions and to obtain additional financing, if needed, and we may be prevented from engaging in transactions that might otherwise be beneficial to us. Our revolving credit facility requires, and our future credit facilities may require, us to maintain certain financial ratios and satisfy certain other financial condition tests. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we may not be able to meet those tests. The breach of any of these covenants could result in a default under our outstanding or future debt. Upon the occurrence of an event of default, the lenders could elect to declare all amounts outstanding under such debts, including accrued interest or other obligations, to be immediately due and payable. If amounts outstanding under such debt were accelerated, our assets might not be sufficient to repay in full that debt and our other debt.
Our revolving credit agreement and the indentures and loan agreement governing our other outstanding debt also contain cross-default and cross-acceleration provisions. Under these provisions, a default or acceleration under one instrument governing our debt may constitute a default under our other debt instruments that contain cross-default and cross-acceleration provisions, which could result in the related debt and the debt under such other instruments becoming immediately due and payable. In such event, we would need to raise funds from alternative sources, which funds might not be available to us on favorable terms, on a timely basis or at all. Alternatively, such a default could require us to sell assets and otherwise curtail operations to pay our creditors. The proceeds of such a sale of assets, or curtailment of operations, might not enable us to pay all of our liabilities.
Other Risks Relating to Our Common Stock
The Massachusetts Business Corporation Act and our By-Laws contain certain anti-takeover provisions.
Sections 8.06 and 7.02 of the Massachusetts Business Corporation Act provide that Massachusetts corporations which are publicly-held must have a staggered board of directors and that written demand by holders of at least 40% of the outstanding shares of each relevant voting group of stockholders is required for stockholders to call a special meeting unless such corporations take certain actions to affirmatively "opt-out" of such requirements. In accordance with these provisions, our By-Laws provide for a staggered board of directors which consists of three classes of directors of which one class is elected each year for a three-year term, and require that written application by holders of at least 25% (which is less than the 40% which would otherwise be applicable without such a specific provision in our By-Laws) of our outstanding shares of common stock is required for stockholders to call a special meeting. In addition, our By-Laws prohibit the removal by the stockholders of a director except for cause. These provisions could inhibit a takeover of our Company by restricting stockholders' action to replace the existing directors or approve other actions which a party seeking to acquire us might propose. A takeover transaction would frequently afford stockholders an opportunity to sell their shares at a premium over then market prices.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.    PROPERTIES
Our principal executive offices are in Norwell, Massachusetts, where we lease approximately 151,000 square feet under arrangements expiring in 2022. We also have regional administrative offices in Texas, South Carolina, Seattle and Alberta, Canada. Our properties are sufficient and suitable for our current needs.
We have a network of more than 465 service locations across 49 states, nine Canadian provinces, Puerto Rico and Mexico. Those service locations include service centers, satellite locations, branches, active hazardous waste management properties, lodging facilities and oil processing facilities. The service centers and branches are the principal sales and service

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centers from which we provide our environmental, energy and industrial services. The active hazardous waste management properties include incinerator facilities, commercial and non-commercial landfills, wastewater treatment facilities, treatment, storage and disposal facilities ("TSDFs"), solvent recovery management and recycling facilities, locations specializing in polychlorinated biphenyls ("PCBs") management, oil accumulation centers, oil terminals and oil re-refineries. Some of our properties offer multiple capabilities. The following sets forth certain information as of December 31, 2017 regarding our properties.
Service Centers, Satellite Locations and Branches
We have approximately 347 service centers, satellite locations and branches throughout the United States and Canada which serve as principal sales and service centers from which we provide parts cleaning services, containerized waste services, oil collection services and other environmental services.
Active Hazardous Waste Management Properties
Incinerator Facilities.   We own five operating incinerator facilities that have a total of nine incinerators with 561,721 tons of total practical capacity and an average utilization rate for 2017 of 87.6%. Our practical capacity is not based on a theoretical 24-hour, seven-day operation, but rather is determined as the production level at which our incinerators can operate with an acceptable degree of efficiency, taking into consideration factors such as longer term customer demand, permanent staffing levels, operating shifts, holidays, scheduled maintenance and mix of product. Capacity utilization is calculated by dividing actual production pounds by practical capacity at each incinerator.
 
# of Incinerators
 
Practical Capacity (Tons)
 
Utilization Rate
Year Ended
December 31, 2017
Arkansas
3

 
145,072

 
84.8
%
Nebraska
1

 
58,808

 
82.3
%
Utah
1

 
66,815

 
86.4
%
Texas
3

 
165,500

 
91.4
%
Ontario, Canada
1

 
125,526

 
88.8
%
 
9

 
561,721

 
87.6
%
Our incinerators offer a wide range of technological capabilities to customers through this network. We provide incineration in the United States through one fluidized bed thermal oxidation unit and three solids and liquids-capable incinerator facilities and we operate in Canada one active hazardous waste liquid injection incinerator. Our state-of-the-art hazardous waste incinerator at our El Dorado, Arkansas site, which officially came online in early 2017, added approximately 70,000 tons of additional capacity to our network.
Commercial and Non-Commercial Landfills.  In the United States and Canada, we operate nine commercial landfills with approximately 30.7 million cubic yards of remaining highly probable airspace. Seven of our commercial landfills are designed and permitted for the disposal of hazardous wastes and two landfills are operated for nonhazardous industrial waste disposal and, to a lesser extent, municipal solid waste. In addition to our commercial landfills, we also own and operate two non-commercial landfills that only accept waste from our on-site incinerators. See "Landfill Accounting" within Note 2, "Significant Accounting Policies," to our consolidated financial statements included in Item 8 of this report for additional information on our commercial and non-commercial landfills.
Wastewater Treatment Facilities. We operate a total of nine facilities, of which six are owned and three are leased, that offer a range of wastewater treatment technologies and customer services. Wastewater treatment consists primarily of three types of services: hazardous wastewater treatment, sludge de-watering or drying, and non-hazardous wastewater treatment.
Treatment, Storage and Disposal Facilities. We operate 18 TSDFs, of which 16 are owned and two are leased, in the United States and Canada. Our TSDFs facilitate the movement of materials among our network of service centers and treatment and disposal facilities. Transportation may be accomplished by truck, rail, barge or a combination of modes, with our own assets or in conjunction with third-party transporters. Specially designed containment systems, vehicles and other equipment permitted for hazardous and industrial waste transport, together with drivers trained in transportation and waste handling procedures, provide for the movement of customer waste streams.
Solvent Recovery Management and Recycling Operations. We own two facilities specializing in solvent recovery management.

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Oil Processing, Blending and Packaging Facilities
Oil Accumulation Centers. We operate a total of nine accumulation centers, of which eight are owned and one is leased, used for accumulating waste oil from our branches.
Oil Terminals. We operate a total of 55 oil terminals, of which 31 are owned and 24 are leased, which collect or process used oil prior to delivery to re-refineries or distribution as RFO.
Oil Recycling and Re-refining Facilities. With our recent acquisitions we now own six oil re-refineries, five in the United States and one in Canada. With more than 200 million gallons of used oil processed annually, we were able to return in 2017 190 million gallons of new re-refined oil, lubricants and byproducts back into the marketplace.
Oil Packaging and Blending Facilities. We operate a total of five oil packaging and blending facilities, of which three are owned and two are leased and used for blending and packaging oil from our branches.
Lodging Facilities
Lodge Operations. We operate five fixed lodges, all of which are owned and located on sites in Alberta, Canada that are leased under long-term operating agreements.
Camps. We operate various camp facilities that can grow and shrink in size and location. Generally, we have ongoing operations at 1-2 larger facilities that we expect to operate on a multi-year basis. Additionally, we have in our fleet that can operate at any time, five office complexes, eight mini-camps, and approximately 35 single and double occupancy drill camps. All of our camp facilities are owned and located on various sites throughout Western Canada. Sites for the larger facilities are generally leased, whereas sites for our smaller facilities are generally provided by our customers.
ITEM 3.    LEGAL PROCEEDINGS
See Note 17, "Commitments and Contingencies," to our consolidated financial statements included in Item 8 of this report for a description of legal proceedings.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.

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PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock
Our common stock trades on the New York Stock Exchange (the "NYSE") under the symbol CLH. The following table sets forth the high and low sales prices of our common stock for the indicated periods as reported by the NYSE.
 
2017
 
2016
 
High
 
Low
 
High
 
Low
First Quarter
$
59.17

 
$
52.77

 
$
49.97

 
$
37.09

Second Quarter
$
61.62

 
$
53.17

 
$
54.54

 
$
46.40

Third Quarter
$
58.28

 
$
49.63

 
$
53.79

 
$
44.91

Fourth Quarter
$
58.22

 
$
51.43

 
$
58.23

 
$
43.03

On February 23, 2018, the closing price of our common stock on the NYSE was $51.13 and there were 274 stockholders of record of our common stock, excluding stockholders whose shares were held in nominee, or "street," name. Based on our last record date, approximately 24,500 additional stockholders beneficially held shares in street name.
We have never declared nor paid any cash dividends on our common stock, and we do not intend to pay any dividends on our common stock in the foreseeable future. We intend to retain our future earnings, if any, for use in the operation and expansion of our business and payment of our outstanding debt, and for our stock repurchase program. In addition, our current credit agreement and indentures limit the amount we could pay as cash dividends on, or for repurchase of, our common stock. For additional information, see Note 14, "Stockholder's Equity," to our consolidated financial statements included in Item 8 of this report.
Issuer Purchases of Equity Securities
Period
Total Number of Shares Purchased (1)
 
Average Price Paid Per Share
 (2)
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3)
October 1, 2017 through October 31, 2017
3,242

 
$
56.70

 

 
$
375,658,142

November 1, 2017 through November 30, 2017
141,999

 
$
53.41

 
140,218

 
$
368,166,530

December 1, 2017 through December 31, 2017
329,468

 
$
53.31

 
318,950

 
$
351,152,555

Total
474,709

 
$
53.37

 
459,168

 
$
351,152,555

______________________
(1)
Includes 15,541 shares withheld by us from employees to satisfy employee tax obligations upon vesting of restricted shares granted under our long-term equity incentive programs.
(2)
The average price paid per share of common stock repurchased under our stock repurchase program includes commissions paid to the brokers.
(3)
On October 31, 2017, our board of directors increased the size of our current share repurchase program from $300 million to $600 million. We have funded and intend to fund the repurchases through available cash resources. The stock repurchase program authorizes us to purchase our common stock on the open market or in privately negotiated transactions periodically in a manner that complies with applicable U.S. securities laws. The number of shares purchased and the timing of the purchases has depended and will depend on a number of factors, including share price, cash required for business plans, trading volume and other conditions. We have no obligation to repurchase stock under this program and may suspend or terminate the repurchase program at any time.






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Table Of Contents

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CLEAN HARBORS, INC.,
NYSE COMPOSITE INDEX, AND CUSTOM PEER GROUP
Performance Graph
The following graph compares the five-year return from investing $100 in each of our common stock, the NYSE Composite Index, and an index of environmental services companies (custom peer group) compiled by CoreData. The environmental services group used by CoreData includes all companies whose listed line-of-business is SIC Code 4953 (refuse systems), and assumes reinvestment of dividends on the ex-dividend date. An index compares relative performance since a particular starting date. In this instance, the starting date was December 31, 2012, when our common stock closed at $55.01 per share.
https://cdn.kscope.io/e295a1993a82f0e17fe43a9b71e3ba22-performancegraph2017a01.jpg
ASSUMES $100 INVESTED ON JAN. 01, 2013
ASSUMES DIVIDENDS REINVESTED

Securities Authorized For Issuance Under Equity Compensation Plans
See Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," for a description of the securities which are authorized for issuance under our equity compensation plans.


25

Table Of Contents

ITEM 6.    SELECTED FINANCIAL DATA
The following summary of consolidated financial information has been derived from the audited consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," of this report and in the annual reports we previously filed with the SEC. This information should be reviewed in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the financial statements and notes thereto included in Item 8, "Financial Statements and Supplementary Data," of this report.
 
For the Year Ended December 31,
(in thousands except per share amounts)
2017
 
2016
 
2015
 
2014
 
2013
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Total revenues
$
2,944,978

 
$
2,755,226

 
$
3,275,137

 
$
3,401,636

 
$
3,509,656

Net income (loss) (1)
$
100,739

 
$
(39,873
)
 
$
44,102

 
$
(28,328
)
 
$
95,566

Earnings (loss) per share: (1)
 
 
 
 
 
 
 
 
 
     Basic
$
1.77

 
$
(0.69
)
 
$
0.76

 
$
(0.47
)
 
$
1.58

     Diluted
$
1.76

 
$
(0.69
)
 
$
0.76

 
$
(0.47
)
 
$
1.57

Other Financial Data:
 
 
 
 
 
 
 
 
 
Adjusted EBITDA (2)
$
425,657

 
$
400,354

 
$
504,167

 
$
521,919

 
$
510,105

 
At December 31,
(in thousands)
2017
 
2016
 
2015
 
2014
 
2013
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets
$
3,706,570

 
$
3,681,920

 
$
3,431,428

 
$
3,689,423

 
$
3,936,430

Long-term obligations (including current portion)
1,629,537

 
1,633,272

 
1,382,543

 
1,380,681

 
1,385,516

Stockholders' equity
1,188,202

 
1,084,241

 
1,096,282

 
1,262,871

 
1,475,639

___________________________________________
(1)
The 2017 results include a net benefit of $93.0 million resulting from impacts of the tax law changes enacted in December of 2017, $7.9 million loss on early extinguishment of debt and a $30.7 million pre-tax gain on the sale of a non-core line of business within our Technical Services segment. The 2016 results include a $34.0 million goodwill impairment charge in our Lodging Services reporting unit and a $16.9 million pre-tax gain on the sale of a non-core line of business within our Industrial and Field Services segment. The 2015 results include a $32.0 million goodwill impairment charge in our Oil and Gas Field Services reporting unit, and the 2014 results include a $123.4 million goodwill impairment charge in our Kleen Performance Products reporting unit. In 2016, we did not record any income tax benefit as a result of the goodwill impairment charge. In 2015 and 2014, we recorded income tax benefits of $2.0 million and $2.7 million, respectively, as a result of the goodwill impairment charges. See Note 4, "Disposition of Businesses," Note 7, "Goodwill and Other Intangible Assets," Note 11, "Financing Arrangements," and Note 12, "Income Taxes," to our consolidated financial statements included in Item 8 of this report for additional information regarding these 2017 and 2016 items.
(2)
The following is a reconciliation of net income (loss) to Adjusted EBITDA for the following periods (in thousands). See additional information regarding this non-GAAP measure under the heading "Adjusted EBITDA" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this report.
 
For the Year Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Net income (loss)
$
100,739

 
$
(39,873
)
 
$
44,102

 
$
(28,328
)
 
$
95,566

Accretion of environmental liabilities
9,460

 
10,177

 
10,402

 
10,612

 
11,541

Depreciation and amortization
288,422

 
287,002

 
274,194

 
276,083

 
264,449

Goodwill impairment charges

 
34,013

 
31,992

 
123,414

 

Other expense (income), net
6,119

 
(6,195
)
 
1,380

 
(4,380
)
 
(1,705
)
Loss on early extinguishment of debt
7,891

 

 

 

 

Gain on sale of businesses
(30,732
)
 
(16,884
)
 

 

 

Interest expense, net
85,808

 
83,525

 
76,553

 
77,668

 
78,376

Pre-tax, non-cash acquisition accounting inventory adjustments

 

 

 

 
13,559

(Benefit) provision for income taxes
(42,050
)
 
48,589

 
65,544

 
66,850

 
48,319

Adjusted EBITDA
$
425,657

 
$
400,354

 
$
504,167

 
$
521,919

 
$
510,105


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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview

We are North America’s leading provider of environmental, energy and industrial services. We believe we operate, in the aggregate, the largest number of hazardous waste incinerators, landfills, treatment facilities and TSDFs in North America. We serve a diverse customer base, including a majority of the Fortune 500, across the chemical, energy, manufacturing and additional markets, as well as numerous government agencies. These customers rely on us to deliver a broad range of services including but not limited to end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services. We are also the largest re-refiner and recycler of used oil in the world and the largest provider of parts cleaning and related environmental services to commercial, industrial and automotive customers in North America.
Performance of our segments is evaluated on several factors of which the primary financial measure is Adjusted EBITDA as described more fully below. The following is a discussion of how management evaluates our segments in regards to other factors including key performance indicators that management uses to assess the segments’ results, as well as certain macroeconomic trends and influences that impact each reportable segment:

Technical Services - Technical Services segment results depend upon the demand by our customers for waste services directly attributable to waste volumes generated by them and project work contracted by our Technical Services segment and/or other segments for which waste handling and/or disposal is required. In managing the business and evaluating performance, management tracks the volumes of waste handled and disposed of through our owned incinerators and landfills as well as the utilization of such incinerators. Levels of activity and ultimate performance associated with this segment are impacted by seasonality in the business and weather conditions, market conditions and overall levels of industrial activity, efficiency of our operations, competition and market pricing of our services and the management of our related operating costs.

Industrial and Field Services - Industrial and Field Services segment results are impacted by the demand for planned and unplanned industrial related cleaning and maintenance services at customer sites and the requirement for environmental cleanup services on a scheduled or emergency basis, including response to national events such as major oil spills, natural disasters or other events where immediate and specialized services are pertinent. Management considers the number of plant sites where services are contracted and expected site turnaround schedules to be indicators of the business’ performance along with the existence of local or national events.

Safety-Kleen - Safety-Kleen segment results are significantly impacted by the overall market pricing and product mix associated with base and blended oil products and, more specifically, the market prices of Group II base oils and blended oil products, which historically have correlated with overall crude oil prices. Costs incurred in connection with the collection of used oils, which are raw materials associated with the segment’s products, can also be volatile. The implementation of our OilPlusTM closed loop initiative resulting in the sale of our renewable oil products directly to our end customers will also affect future operating results. In addition, this segment's results are also impacted by the number of parts washers serviced by the business and the ability to attract small quantity waste producers as customers and integrate them into the Clean Harbors waste network.

Oil, Gas and Lodging Services - Oil, Gas and Lodging Services segment results primarily depend upon levels of oil and gas related exploration, drilling and refining activity in North America. The levels of such oil-related activity are largely supported by the number of oil rigs in operation, which along with plant turnaround activity in the region, also drives the demand and related pricing for lodging and camp accommodations. Oil price volatility in recent years has resulted in lower customer spending and activity levels which have negatively impacted the business’ results. To mitigate the decrease in demand experienced in the manufacturing operation of our lodging business, we have targeted more non-traditional markets such as schools, hospitals, and other municipal structures to offer our modular unit accommodations and related services. The majority of the segment's operations are in Canada, and therefore the impact of U.S. to Canadian dollar foreign currency translation can also impact the segment's results.






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Highlights

Total revenues for 2017 increased 6.9% to $2.94 billion, compared with $2.76 billion in 2016. Increases in total revenues were primarily related to growth in our Technical Services and Safety-Kleen segments. Direct revenues in our Technical Services segment increased $87.4 million in 2017 compared with 2016 due to increased revenues from higher waste volumes disposed of in our network, which in 2017 included our new hazardous waste incinerator at our El Dorado, Arkansas site. Direct revenues recorded by Safety-Kleen increased $91.8 million in 2017 as compared to 2016 primarily due to improved pricing conditions related to our renewable oil products, incremental revenues generated from recent acquisitions, continued organic growth related to our Safety-Kleen Environmental services business and the implementation of our OilPlusTM closed loop initiative. The strengthening of the Canadian dollar positively impacted our consolidated revenues by $11.6 million in 2017 as compared to 2016.

Income from operations in 2017 was $127.8 million, compared with $69.2 million in 2016. We reported net income in 2017 of $100.7 million, compared to a net loss of $39.9 million in 2016. The net income in 2017 included a $93.0 million net benefit recorded as a component of income tax expense which resulted from impacts of recent tax reform law changes which were signed into law in December 2017. The net loss in 2016 included a $34.0 million goodwill impairment charge recorded on our Lodging Services reporting unit. Adjusted EBITDA, which is the primary financial measure by which our segments are evaluated, increased 6.3% to $425.7 million in 2017 from $400.4 million in 2016. The increased level of Adjusted EBITDA in 2017 was primarily attributable to higher revenue amounts as described above. Additional information regarding Adjusted EBITDA, which is a non-GAAP measure, including a reconciliation of Adjusted EBITDA to net income (loss), appears below under "Adjusted EBITDA."
Net cash from operating activities for 2017 was $285.7 million, an increase of $26.1 million from 2016. Adjusted free cash flow, which management uses to measure our strength and ability to generate cash, was $140.2 million in 2017, which represented a $79.2 million increase over 2016 primarily due to a significant reduction in capital expenditures and an increase in operating income. Additional information regarding adjusted free cash flow, which is a non-GAAP measure, including a reconciliation of adjusted free cash flow to net cash from operating activities, appears below under "Adjusted free cash flow."




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Table Of Contents

Segment Performance
The primary financial measure by which we evaluate the performance of our segments is Adjusted EBITDA. The following table sets forth certain financial information associated with our results of operations for the years ended December 31, 2017, 2016 and 2015.
 
Summary of Operations (in thousands)
 
Year Ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$ Change
 
% Change
 
$ Change
 
% Change
Direct Revenues(1):
 

 
 

 
 

 
 

 
 
 
 

 
 
Technical Services
$
1,144,149

 
$
1,056,735

 
$
1,139,080

 
$
87,414

 
8.3
 %
 
$
(82,345
)
 
(7.2
)%
Industrial and Field Services
593,722

 
582,215

 
989,953

 
11,507

 
2.0

 
(407,738
)
 
(41.2
)
Safety-Kleen
1,087,886

 
996,083

 
941,689

 
91,803

 
9.2

 
54,394

 
5.8

Oil, Gas and Lodging Services
119,603

 
119,883

 
207,139

 
(280
)
 
(0.2
)
 
(87,256
)
 
(42.1
)
Corporate Items
(382
)
 
310

 
(2,724
)
 
(692
)
 
N/M

 
3,034

 
N/M

Total
2,944,978

 
2,755,226

 
3,275,137

 
189,752

 
6.9

 
(519,911
)
 
(15.9
)
Cost of Revenues(2):
 

 
 

 
 

 
 

 
 
 
 

 
 
Technical Services
781,239

 
710,338

 
769,625

 
70,901

 
10.0

 
(59,287
)
 
(7.7
)
Industrial and Field Services
487,651

 
468,603

 
762,992

 
19,048

 
4.1

 
(294,389
)
 
(38.6
)
Safety-Kleen
690,344

 
645,275

 
649,317

 
45,069

 
7.0

 
(4,042
)
 
(0.6
)
Oil, Gas and Lodging Services
104,899

 
108,688

 
174,272

 
(3,789
)
 
(3.5
)
 
(65,584
)
 
(37.6
)
Corporate Items
(1,460
)
 
(47
)
 
600

 
(1,413
)
 
N/M

 
(647
)
 
N/M

Total
2,062,673

 
1,932,857

 
2,356,806

 
129,816

 
6.7

 
(423,949
)
 
(18.0
)
Selling, General and Administrative Expenses:
 

 
 

 
 

 
 

 
 
 
 

 
 
Technical Services
86,318

 
75,221

 
77,718

 
11,097

 
14.8

 
(2,497
)
 
(3.2
)
Industrial and Field Services
63,061

 
62,421

 
65,514

 
640

 
1.0

 
(3,093
)
 
(4.7
)
Safety-Kleen
147,731

 
131,262

 
120,110

 
16,469

 
12.5

 
11,152

 
9.3

Oil, Gas and Lodging Services
12,996

 
14,487

 
21,163

 
(1,491
)
 
(10.3
)
 
(6,676
)
 
(31.5
)
Corporate Items
146,542

 
138,624

 
129,659

 
7,918

 
5.7

 
8,965

 
6.9

Total
456,648

 
422,015

 
414,164

 
34,633

 
8.2

 
7,851

 
1.9

Adjusted EBITDA
 

 
 

 
 

 
 

 
 
 
 

 
 
Technical Services
276,592

 
271,176

 
291,737

 
5,416

 
2.0

 
(20,561
)
 
(7.0
)
Industrial and Field Services
43,010

 
51,191

 
161,447

 
(8,181
)
 
(16.0
)
 
(110,256
)
 
(68.3
)
Safety-Kleen
249,811

 
219,546

 
172,262

 
30,265

 
13.8

 
47,284

 
27.4

Oil, Gas and Lodging Services
1,708

 
(3,292
)
 
11,704

 
5,000

 
151.9

 
(14,996
)
 
(128.1
)
Corporate Items
(145,464
)
 
(138,267
)
 
(132,983
)
 
(7,197
)
 
(5.2
)
 
(5,284
)
 
(4.0
)
Total
$
425,657

 
$
400,354

 
$
504,167

 
$
25,303

 
6.3
 %
 
$
(103,813
)
 
(20.6
)%
___________________________________
N/M = not meaningful
(1)
Direct revenue is revenue allocated to the segment performing the provided service.
(2)
Cost of revenue is shown exclusive of items presented separately on the statements of operations, which consist of (i) accretion of environmental liabilities and (ii) depreciation and amortization.



29

Table Of Contents

Direct Revenues
There are many factors which have impacted and continue to impact our revenues. These factors include, but are not limited to: overall industrial activity, general conditions of the energy related industries, competitive industry pricing, the effects of fuel prices on our fuel recovery fees, acquisitions, the level of emergency response projects and foreign currency movements.

Technical Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Direct revenues
$
1,144,149

 
$
1,056,735

 
$
1,139,080

 
$
87,414

 
8.3
%
 
$
(82,345
)
 
(7.2
)%
Technical Services direct revenues for the year ended December 31, 2017 increased $87.4 million from the comparable period in 2016. The Transformer Services business, which we sold on June 30, 2017, had revenues of $20.5 million in 2017 and $37.7 million in 2016. Excluding those revenues, Technical Services revenue would have increased $104.6 million primarily due to increased revenues associated with waste projects and higher waste volumes disposed of in our incinerators and landfills due to improving economic conditions and business initiatives focused on waste volumes. For the year ended December 31, 2017, landfill volumes increased 12.1% from the comparable period in 2016. The utilization rate at our incinerators was 87.6% on a practical capacity of 561,721 tons for the year ended December 31, 2017, compared with 88.8% on a practical capacity of 491,721 tons in 2016. The increase in practical capacity was the result of the addition of our new waste incinerator at our El Dorado, Arkansas site, which came online in the first quarter of 2017 and added 70,000 tons of additional capacity to our network.
Technical Services direct revenues for the year ended December 31, 2016 decreased $82.3 million from the comparable period in 2015 primarily due to decreased revenues associated with our waste disposal services whereby waste is disposed of through our incinerator and landfill facilities network. This direct revenue decrease was impacted by lower waste volumes in our landfills, which decreased 34% primarily due to lower industrial and energy related waste streams, as well as project deferrals and lower customer spending related to waste projects and remediation activities. The utilization rate at our incinerators was 88.8% for the year ended December 31, 2016, compared with 90.9% in the comparable period of 2015. The decrease in utilization rate was primarily due to waste streams as discussed above, and a greater number of turnaround days at our incinerator facilities in 2016.
Industrial and Field Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Direct revenues
$
593,722

 
$
582,215

 
$
989,953

 
$
11,507

 
2.0
%
 
$
(407,738
)
 
(41.2
)%
Industrial and Field Services direct revenues for the year ended December 31, 2017 increased $11.5 million from the comparable period in 2016. Included in the year ended December 31, 2016 results was $36.7 million of direct revenues from our Catalyst Services business, which we sold on September 1, 2016. Included in the year ended December 31, 2017 results was $10.4 million of direct revenues from acquisitions in our Industrial Services business in 2017. Excluding the impact of the divestiture of the Catalyst Services business and acquisitions in 2017, direct revenues increased $37.8 million from the comparable period in 2016. Revenues from our Industrial Services business increased $9.4 million primarily due to increased turnaround work in Western Canada, partially offset by lower revenues from impacts of the hurricanes in the gulf region of the U.S. In addition revenues from our Field Services business increased $28.4 million due primarily to the opening of new branch locations and increased emergency response revenues from the hurricanes which impacted Texas, Florida and Puerto Rico in 2017. Inclusive in the year-over-year changes within this segment was also the positive impact of foreign currency translation on our Canadian operations of approximately $4.2 million in the year ended December 31, 2017 from the comparable period in 2016.

Industrial and Field Services direct revenues for the year ended December 31, 2016 decreased $407.7 million from the comparable period in 2015. The decrease was primarily due to the large emergency response projects associated with our Field Services business in 2015 which did not reoccur in 2016. Those large emergency response projects accounted for revenues of $313.8 million in 2015. In addition, for the year ended December 31, 2016, lower activity levels and pricing pressures across North America reduced customer spending on maintenance and turnaround projects, resulting in a decrease in revenues of $98.1 million from the comparable period in 2015. Inclusive in the year-over-year changes within this segment was the

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negative impact of foreign currency translation on our Canadian operations of approximately $7.5 million for the year ended December 31, 2016 from the comparable period in 2015.
Safety-Kleen
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Direct revenues
$
1,087,886

 
$
996,083

 
$
941,689

 
$
91,803

 
9.2
%
 
$
54,394

 
5.8
%
Safety-Kleen direct revenues for the year ended December 31, 2017 increased $91.8 million from the comparable period in 2016. This increase was derived from more favorable pricing on oil products, incremental revenues from acquisitions and growth in the business. Increased base and blended oil pricing and volumes, supported by acquisitions, accounted for $87.2 million of incremental direct revenue from the comparable period in 2016. This increase was partially offset by lower revenue of $15.6 million from a decrease in prices charged for used motor oil collection in 2017. Inclusive in the year-over-year changes within the Safety-Kleen segment was also the positive impact of foreign currency translation on our Canadian operations of approximately $2.8 million in the year ended December 31, 2017 from the comparable period in 2016.

Safety-Kleen direct revenues for the year ended December 31, 2016 increased $54.4 million from the comparable period in 2015. This increase was derived from acquisitions which accounted for $72.9 million of incremental revenue and a continued shift from a pay-for-oil to a charge-for-oil program which began in 2015 and accounted for $56.6 million of incremental revenue in 2016. These items were partially offset by decreases in base and blended oil pricing, which accounted for a $73.0 million decrease to direct revenues in the year ended December 31, 2016 from the comparable period in 2015. Inclusive in the year-over-year changes within the Safety-Kleen segment was also the negative impact of foreign currency translation on our Canadian operations of approximately $4.6 million in the year ended December 31, 2016 from the comparable period in 2015.

Oil, Gas and Lodging Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Direct revenues
$
119,603

 
$
119,883

 
$
207,139

 
$
(280
)
 
(0.2
)%
 
$
(87,256
)
 
(42.1
)%
Oil, Gas and Lodging Services direct revenues for the year ended December 31, 2017 remained flat from the comparable period in 2016. Direct revenues from Lodging Services decreased $14.3 million as a result of lower occupancy and average room rates due to the Fort McMurray fire in 2016 and lower manufacturing revenues, partially offset by increased revenues from Oil and Gas Field Services of $14.0 million as a result of growth in surface rentals and directional boring driven by the increase in average rigs serviced. Rig count serviced increased approximately 44% for the year ended December 31, 2017 from the comparable period in 2016. Inclusive in the year-over-year changes within this segment was also the positive impact of foreign currency translation on our Canadian operations of approximately $1.8 million for the year ended December 31, 2017 from the comparable period in 2016.
Oil, Gas and Lodging Services direct revenues for the year ended December 31, 2016 decreased $87.3 million from the comparable period in 2015 primarily due to lower pricing, business activity and rig counts serviced consistent with overall market conditions. Lower exploration budgets of our customers, project cancellations, and reduced customer spending also negatively impacted results in 2016. Rig count serviced decreased approximately 40% for the year ended December 31, 2016 from the comparable period in 2015. Inclusive in the year-over-year changes within this segment was also the negative impact of foreign currency translation on our Canadian operations of approximately $3.5 million for the year ended December 31, 2016 from the comparable period in 2015.
Cost of Revenues
We believe that our ability to manage operating costs is important to our ability to remain price competitive. We continue to upgrade the quality and efficiency of our services through the development of new technology and continued modifications at our facilities, invest in new business opportunities and aggressively implement strategic sourcing and logistics solutions as well as other cost reduction initiatives in an effort to optimize our operating margins.


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Technical Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Cost of revenues
$
781,239

 
$
710,338

 
$
769,625

 
$
70,901

 
10.0
%
 
$
(59,287
)
 
(7.7
)%
As a % of Direct Revenue
68.3
%
 
67.2
%
 
67.6
%
 


 
1.1
%
 
 
 
(0.4
)%
Technical Services cost of revenues for the year ended December 31, 2017 increased $70.9 million from the comparable period in 2016. The Transformer Services business had cost of revenues of $15.9 million in 2017 and $30.5 million in 2016. Excluding those costs, Technical Services cost of revenues for the year ended December 31, 2017 increased $85.5 million from the comparable period in 2016 primarily due to increases in equipment and supply costs of $32.6 million, labor related costs of $26.2 million, and transportation, disposal and fuel costs of $22.6 million. The incremental operating costs were primarily driven by the new El Dorado incinerator, which came online in early 2017, and higher down days across our network associated with the hurricanes and start-up activities at our El Dorado incinerator. The higher concentration of lower margin waste in our incineration network decreased profitability as we focused on driving network utilization in response to the increased capacity. We expect to improve margins going forward now that network capacity is at normalized levels.
Technical Services cost of revenues for the year ended December 31, 2016 decreased $59.3 million from the comparable period in 2015 primarily due to lower overall activity levels. Specific cost reductions included decreases in equipment and supply costs of $25.0 million, labor and transportation related cost of $23.6 million, and $10.7 million of costs spread across multiple expense categories. As a percentage of direct revenue, our costs remained consistent for the year ended December 31, 2016 as compared to 2015.
Industrial and Field Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Cost of revenues
$
487,651

 
$
468,603

 
$
762,992

 
$
19,048

 
4.1
%
 
$
(294,389
)
 
(38.6
)%
As a % of Direct Revenue
82.1
%
 
80.5
%
 
77.1
%
 
 
 
1.6
%
 
 
 
3.4
 %
Industrial and Field Services cost of revenues for the year ended December 31, 2017 increased $19.0 million from the comparable period in 2016. Included in the results for the year ended December 31, 2016 was $32.2 million of cost of revenues from our Catalyst Services business, which we sold on September 1, 2016. Excluding those costs, Industrial and Field Services cost of revenues for the year ended December 31, 2017 increased $51.2 million from the comparable period in 2016 primarily due to increased labor and subcontractor costs of $33.4 million, increased equipment and supply costs of $14.9 million and increased transportation, disposal and fuel costs of $5.3 million. These cost increases reflect the integration of our acquisition and increased emergency response services in our field services business. As a percentage of direct revenues, these costs increased primarily as a result of continued pricing pressures in the industry and integration cost.
Industrial and Field Services cost of revenues for the year ended December 31, 2016 decreased $294.4 million from the comparable period in 2015 primarily due to the costs associated with large emergency response projects which did not reoccur in 2016. Costs of revenues as a percentage of direct revenue increased 3.4% for the year ended December 31, 2016 from the comparable period in 2015. The increase as a percentage of direct revenue was primarily attributable to the lack of large emergency response projects in 2016. When such large projects occur, the business is able to greater leverage its costs structure, resulting in higher profit margins.
Safety-Kleen
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Cost of revenues
$
690,344

 
$
645,275

 
$
649,317

 
$
45,069

 
7.0
 %
 
$
(4,042
)
 
(0.6
)%
As a % of Direct Revenue
63.5
%
 
64.8
%
 
69.0
%
 
 
 
(1.3
)%
 
 
 
(4.2
)%
Safety-Kleen cost of revenues for the year ended December 31, 2017 increased $45.1 million from the comparable period in 2016 primarily due to increased equipment and supply costs of $19.0 million, increased labor related costs of $13.8 million and increased transportation, disposal and fuel costs of $8.3 million. As a percentage of direct revenue, these costs decreased 1.3% in the year ended December 31, 2017 from the comparable period in 2016 primarily as a result of greater direct revenue levels driven by pricing partially offset by higher maintenance costs in the re-refinery network. Based on recent positive pricing trends, we expect margin improvement to continue in 2018.

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Safety-Kleen cost of revenues for the year ended December 31, 2016 decreased $4.0 million from the comparable period in 2015 primarily due to decreased costs of used oil inventory consumed during 2016. During 2015, the segment recognized $27.1 million of charges for high-priced inventory relating to used oil collected prior to the full implementation of our charge-for-oil program which did not reoccur in 2016. This decrease was partially offset by increased labor related costs of $21.6 million primarily related to our recent acquisitions and implementation of the closed loop initiative. As a percentage of direct revenue, these costs decreased 4.2% in the year ended December 31, 2016 from the comparable period in 2015 primarily due to successful management of our charge-for-oil program.
Oil, Gas and Lodging Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
Cost of revenues
$
104,899

 
$
108,688

 
$
174,272

 
$
(3,789
)
 
(3.5
)%
 
$
(65,584
)
 
(37.6
)%
As a % of Direct Revenue
87.7
%
 
90.7
%
 
84.1
%
 
 
 
(3.0
)%
 
 
 
6.6
 %
Oil, Gas and Lodging Services cost of revenues for the year ended December 31, 2017 decreased $3.8 million from the comparable period in 2016. This decrease was primarily due to a decrease in supplies and materials costs. As a percentage of direct revenue, these costs decreased 3.0% in the year ended December 31, 2017 from the comparable period in 2016 as management continued to focus on proper alignment of its costs structure for this business.
Oil, Gas and Lodging Services cost of revenues for the year ended December 31, 2016 decreased $65.6 million from the comparable period in 2015. This change was primarily due to decreases in labor and equipment related costs of $48.4 million and catering and material costs of $13.8 million during the year ended December 31, 2016 from the comparable period in 2015. These decreases were the result of overall lower demand for our services as overall activity in the regions in which this business operates declined. As a percentage of direct revenue, these costs increased 6.6% in the year ended December 31, 2016 from the comparable period in 2015, as certain fixed costs incurred in the operations of these businesses could not be reduced proportionately to the pricing and activity declines which occurred.
Selling, General and Administrative Expenses
Selling, General and Administrative expenses represent costs incurred in aspects of our business which are directly attributable to the sale of our services and/or products. We strive to manage such costs commensurate with the overall performance of our segments and corresponding revenue levels. We believe that our ability to properly align these costs with overall business performance is reflective of our strong management of the businesses and further promotes our ability to remain competitive in the marketplace.
Technical Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
SG&A
$
86,318

 
$
75,221

 
$
77,718

 
$
11,097

 
14.8
%
 
$
(2,497
)
 
(3.2
)%
As a % of Direct Revenue
7.5
%
 
7.1
%
 
6.8
%
 
 
 
0.4
%
 
 
 
0.3
 %
Technical Services selling, general and administrative expenses for the year ended December 31, 2017 increased $11.1 million from the comparable period in 2016 primarily due to increased labor related costs including increased commissions. These increases were consistent with the growth of the business during 2017 as compared to the comparable period in 2016. As a percentage of direct revenue, our costs remained consistent for the year ended December 31, 2017 as compared to 2016.
Technical Services selling, general and administrative expenses for the year ended December 31, 2016 decreased $2.5 million from the comparable period in 2015 primarily due to a decrease in variable compensation of $2.1 million. As a percentage of direct revenue, our costs remained consistent for the year ended December 31, 2016 as compared to 2015.

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Table Of Contents

Industrial and Field Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
SG&A
$
63,061

 
$
62,421

 
$
65,514

 
$
640

 
1.0
 %
 
$
(3,093
)
 
(4.7
)%
As a % of Direct Revenue
10.6
%
 
10.7
%
 
6.6
%
 
 
 
(0.1
)%
 
 
 
4.1
 %
Industrial and Field Services selling, general and administrative expenses for the year ended December 31, 2017 increased $0.6 million from the comparable period in 2016. Included in the results for the year ended December 31, 2016 was $3.2 million of selling, general and administrative expenses from our Catalyst Services business, which we sold on September 1, 2016. Excluding those costs, Industrial and Field Services selling, general and administrative expenses for the year ended December 31, 2017 increased $3.8 million primarily due to increased variable compensation including increased commissions. As a percentage of direct revenue, our costs remained consistent for the year ended December 31, 2017 as compared to 2016.
Industrial and Field Services selling, general and administrative expenses for the year ended December 31, 2016 decreased $3.1 million from the comparable period in 2015 primarily due to decreases in professional fees and variable compensation of approximately $2.5 million. As a percentage of direct revenue, selling, general and administrative expenses increased 4.1% in the year ended December 31, 2016 from the comparable period in 2015 primarily due to the decreased overall revenue level experienced during 2016.
Safety-Kleen
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
SG&A
$
147,731

 
$
131,262

 
$
120,110

 
$
16,469

 
12.5
%
 
$
11,152

 
9.3
%
As a % of Direct Revenue
13.6
%
 
13.2
%
 
12.8
%
 
 
 
0.4
%
 
 
 
0.4
%
Safety-Kleen selling, general and administrative expenses for the year ended December 31, 2017 increased $16.5 million from the comparable period in 2016 primarily due to increased labor related costs of $11.6 million, and an additional $4.9 million related to costs generated from strategic initiatives in the areas of the OilPlusTM closed loop initiative and centralization activities associated with this segment. As a percentage of direct revenue, our costs remained consistent for the year ended December 31, 2017 as compared to 2016.
Safety-Kleen selling, general and administrative expenses for the year ended December 31, 2016 increased $11.2 million from the comparable period in 2015 primarily due to increases in labor related costs of $6.3 million as a result of our recent acquisitions and changes in estimates for environmental liabilities of $2.3 million which did not reoccur in 2016. As a percentage of direct revenue, our costs remained consistent for the year ended December 31, 2016 as compared to 2015.
Oil, Gas and Lodging Services
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
SG&A
$
12,996

 
$
14,487

 
$
21,163

 
$
(1,491
)
 
(10.3
)%
 
$
(6,676
)
 
(31.5
)%
As a % of Direct Revenue
10.9
%
 
12.1
%
 
10.2
%
 
 
 
(1.2
)%
 
 
 
1.9
 %
Oil, Gas and Lodging Services selling, general and administrative expenses for the year ended December 31, 2017 decreased $1.5 million from the comparable period in 2016 primarily due to lower labor related costs and bad debt expense. As a percentage of direct revenue, selling, general and administrative expenses decreased 1.2% in the year ended December 31, 2017 from the comparable period in 2016 as management continued to focus on proper alignment of its costs structure for this business.
Oil, Gas and Lodging Services selling, general and administrative expenses for the year ended December 31, 2016 decreased $6.7 million from the comparable period in 2015 primarily due to decreases in labor related costs of $4.0 million and legal costs of $1.3 million. As a percentage of direct revenue, selling, general and administrative expenses increased 1.9% in the year ended December 31, 2016 from the comparable period in 2015 as a result of lower overall revenues.

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Corporate Items
 
For the years ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$
Change
 
%
Change
 
$
Change
 
%
Change
SG&A
$
146,542

 
$
138,624

 
$
129,659

 
$
7,918

 
5.7
%
 
$
8,965

 
6.9
%
Corporate Items selling, general and administrative expenses for the year ended December 31, 2017 increased $7.9 million from the comparable period in 2016 primarily due to an increase to variable compensation of $7.4 million and stock-based compensation of $3.4 million attributable to greater revenue and earnings results in 2017, partially offset by a reduction in severance costs of $3.5 million.
Corporate Items selling, general and administrative expenses for the year ended December 31, 2016 increased $9.0 million from the comparable period in 2015 primarily due to an increase in severance related costs of $7.0 million and changes in estimates for environmental liabilities of $6.9 million which did not reoccur in 2015. These negative impacts on a year-over-year basis were partially offset by decreases in labor related costs of $5.4 million related to cost saving initiatives implemented throughout the year.
Adjusted EBITDA
Management considers Adjusted EBITDA to be a measurement of performance which provides useful information to both management and investors. Adjusted EBITDA should not be considered an alternative to net income or other measurements under generally accepted accounting principles ("GAAP"). Adjusted EBITDA is not calculated identically by all companies and, therefore our measurements of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
We use Adjusted EBITDA to enhance our understanding of our operating performance, which represents our views concerning our performance in the ordinary, ongoing and customary course of our operations. We historically have found it helpful, and believe that investors have found it helpful, to consider an operating measure that excludes certain expenses relating to transactions not reflective of our core operations.
The information about our operating performance provided by this financial measure is used by our management for a variety of purposes. We regularly communicate Adjusted EBITDA results to our lenders and to our board of directors and discuss with the board our interpretation of such results. We also compare our Adjusted EBITDA performance against internal targets as a key factor in determining incentive compensation for executives and other employees, largely because we believe that this measure is indicative of how the fundamental business is performing and is being managed.
We also provide information relating to our Adjusted EBITDA so that analysts, investors and other interested persons have the same data that we use to assess our core operating performance. We believe that Adjusted EBITDA should be viewed only as a supplement to the GAAP financial information. We also believe, however, that providing this information in addition to, and together with, GAAP financial information permits the foregoing persons to obtain a better understanding of our core operating performance and to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance on a standalone and a comparative basis.
The following is a reconciliation of net income (loss) to Adjusted EBITDA for the following periods (in thousands):
 
Year Ended December 31,
 
2017
 
2016
 
2015
Net income (loss)
$
100,739

 
$
(39,873
)
 
$
44,102

Accretion of environmental liabilities
9,460

 
10,177

 
10,402

Depreciation and amortization
288,422

 
287,002

 
274,194

Goodwill impairment charges

 
34,013

 
31,992

Other expense (income), net
6,119

 
(6,195
)
 
1,380

Loss on early extinguishment of debt
7,891

 

 

Gain on sale of businesses
(30,732
)
 
(16,884
)
 

Interest expense, net
85,808

 
83,525

 
76,553

(Benefit) provision for income taxes
(42,050
)
 
48,589

 
65,544

Adjusted EBITDA
$
425,657

 
$
400,354

 
$
504,167


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Depreciation and Amortization
 
Year Ended December 31,
 
2017 over 2016
 
2016 over 2015
(in thousands)
2017
 
2016
 
2015
 
$ Change
 
% Change
 
$ Change
 
% Change
Depreciation of fixed assets and landfill amortization
$
251,403

 
$
246,960

 
$
233,998

 
$
4,443

 
1.8
 %
 
$
12,962

 
5.5
 %
Permits and other intangibles amortization
37,019

 
40,042

 
40,196

 
(3,023
)
 
(7.5
)%
 
(154
)
 
(0.4
)%
Total depreciation and amortization
$
288,422

 
$
287,002

 
$
274,194

 
$
1,420

 
0.5
 %
 
$
12,808

 
4.7
 %
Depreciation and amortization for the year ended December 31, 2017 remained consistent with the comparable period in 2016.
Depreciation and amortization increased $12.8 million for the year ended December 31, 2016 from the comparable period in 2015 primarily due to a larger fixed asset based resulting from our 2016 acquisitions.
Goodwill impairment charges
 
Year Ended December 31,
 
2017 over 2016
 
2016 over 2015
(in thousands)
2017
 
2016
 
2015
 
$ Change
 
% Change
 
$ Change
 
% Change
Goodwill impairment charges
$

 
$
34,013

 
$
31,992

 
$
(34,013
)
 
(100.0
)%
 
$
2,021

 
6.3
%
During the year ended December 31, 2016, we recorded a $34.0 million goodwill impairment charge in our Lodging Services reporting unit. During the year ended December 31, 2015, we recorded a $32.0 million goodwill impairment charge in our Oil and Gas Field Services reporting unit. For additional information regarding our 2016 and 2015 goodwill impairment charges, see Note 7, "Goodwill and Other Intangible Assets," under Item 8, "Financial Statements and Supplementary Data," of this report, and the discussion under "Goodwill and Other Long-Lived Assets" under "Critical Accounting Policies and Estimates" below.
Other (Expense) Income, net
 
Year Ended December 31,
 
2017 over 2016
 
2016 over 2015
(in thousands)
2017
 
2016
 
2015
 
$ Change
 
% Change
 
$ Change
 
% Change
Other (expense) income, net
$
(6,119
)
 
$
6,195

 
$
(1,380
)
 
$
(12,314
)
 
(198.8
)%
 
$
7,575

 
(548.9
)%
For the year ended December 31, 2017, other (expense) income, net decreased $12.3 million from the comparable period in 2016 primarily due to losses recognized on sales or disposals of fixed assets in 2017 compared to gains recognized on sales of fixed assets in 2016. Other (expense) income, net increased $7.6 million for the year ended December 31, 2016 as compared to 2015 primarily due to gains recognized on sales of fixed assets.
Loss on early extinguishment of debt
 
Year Ended December 31,
 
2017 over 2016
 
2016 over 2015
(in thousands)
2017
 
2016
 
2015
 
$ Change
 
% Change
 
$ Change
 
% Change
Loss on early extinguishment of debt
$
(7,891
)
 
$

 
$

 
$
(7,891
)
 
100
%
 
$

 
%
During the year ended December 31, 2017, we recorded a $7.9 million loss in connection with the early extinguishment of $400.0 million of previously outstanding senior unsecured notes which were refinanced in conjunction with the issuance of a $400.0 million senior secured term loan in the second quarter of 2017. The loss consisted of amounts paid in excess of par in order to extinguish the debt prior to maturity and non-cash expenses related to the write-off of unamortized financing costs. For additional information regarding our financing arrangements, see Note 11, "Financing Arrangements," under Item 8, "Financial Statements and Supplementary Data," of this report.


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Table Of Contents

Gain on sale of businesses
 
Year Ended December 31,
 
2017 over 2016
 
2016 over 2015
 
2017
 
2016
 
2015
 
$ Change
 
% Change
 
$ Change
 
% Change
Gain on sale of businesses
$
30,732

 
$
16,884

 
$

 
$
13,848

 
82
%
 
$
16,884

 
100
%
During the year ended December 31, 2017, we recorded a $30.7 million gain on the sale of our Transformer Services business. During the year ended December 31, 2016, we recorded a $16.9 million gain on the sale of our Catalyst Services business. For additional information regarding this gain on sale of businesses, see Note 4, "Disposition of Businesses," under Item 8, "Financial Statements and Supplementary Data," of this report.
(Benefit) provision for Income Taxes
 
Year Ended December 31,
 
2017 over 2016
 
2016 over 2015
(in thousands)
2017
 
2016
 
2015
 
$ Change
 
% Change
 
$ Change
 
% Change
(Benefit) provision for income taxes
$
(42,050
)
 
$
48,589

 
$
65,544

 
$
(90,639
)
 
(186.5
)%
 
$
(16,955
)
 
(25.9
)%
(Benefit) provision for income taxes for fiscal years 2017, 2016 and 2015 was $(42.1) million, $48.6 million, and $65.5 million, respectively. The income tax benefit in 2017 was primarily driven by impacts from the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) which was enacted in December 2017. Impacts of the Tax Act resulted in a net benefit of $93.0 million being recorded in 2017. See Note 12, "Income Taxes," under Item 8, "Financial Statements and Supplementary Data," of this report for more information related to the Tax Act and its impacts. Excluding the impacts of the Tax Act, a provision of $51.0 million would have been recognized, yielding an effective tax rate of 86.8% in 2017.
The mix of U.S. and Canadian taxable income and losses in recent years, combined largely with the impacts of valuation allowances being recorded relative to taxable losses generated in certain Canadian jurisdictions has had significant impacts on the recorded income tax expense amounts and has caused such amounts and resulting effective tax rates to represent significant variations from more customary relationships between pre-tax income and the provision for income taxes. Aside from the impact of the Tax Act, the variation from a more customary effective tax rate in 2017 was primarily related to a $14.5 million valuation allowance recorded relative to net operating loss carryforwards generated by certain Canadian subsidiaries in 2017 and the impacts of recording $3.7 million of unrecognized tax benefits associated with current and prior years' tax positions taken. Variations from a more customary effective tax rate in 2016 was primarily due to the recognition of a $12.9 million valuation allowance related to net operating loss carryforwards generated by certain Canadian subsidiaries in 2016, as well as an additional $9.7 million valuation allowance recorded as a result of a change in the likelihood of realizing a benefit from foreign tax credits and other net deferred tax assets. Additionally, the $34.0 million goodwill impairment charge in our Lodging Services reporting unit recorded in 2016 was a non-deductible tax item, and therefore no tax benefit was recorded on that loss and further caused the 2016 effective tax rate to vary from a more typical relationship between income before taxes and the recorded provision for income taxes. The 2015 provision and related effective rate was also impacted by the $32.0 million goodwill impairment charge in our Oil and Gas Field Services reporting unit for which a $2.0 million tax benefit was recorded.
Liquidity and Capital Resources    
 
For the years ended December 31,
(in thousands)
2017
 
2016
 
2015
Net cash from operating activities
$
285,698

 
$
259,624

 
$
396,383

Net cash used in investing activities
(203,267
)
 
(361,777
)
 
(350,642
)
Net cash (used in) from financing activities
(72,760
)
 
220,235

 
(90,179
)
Net cash from operating activities
Net cash from operating activities for the year ended December 31, 2017 was $285.7 million, an increase of $26.1 million compared to net cash from operating activities for the year ended December 31, 2016. The change primarily resulted from higher income levels generated during the year ended December 31, 2017 and the impacts of changes in net working capital related to increases in cash flows from other current assets, partially offset by an increase in accounts receivable and unbilled accounts receivable as a result of increased incremental revenues during the year ended December 31, 2017.
Net cash from operating activities for the year ended December 31, 2016 was $259.6 million, a decrease of $136.8 million compared to net cash from operating activities for the year ended December 31, 2015. The change primarily resulted

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from lower income generated in 2016 and the impacts of changes in net working capital related to increases in inventory as a result of our closed loop initiative, as well as decreases to accounts payable as compared to the prior year.
Net cash used in investing activities
Net cash used in investing activities for the year ended December 31, 2017 was $203.3 million, a decrease of $158.5 million compared to cash used in investing activities for the year ended December 31, 2016. The change was primarily driven by a decrease in cash paid for acquisitions in 2017 and a decrease in capital expenditures, which were greater during 2016 due to the construction of our new hazardous waste incinerator at our El Dorado, Arkansas site, which came online in the first quarter of 2017. The decrease in cash used in investing activities was partially offset by cash used to purchase highly liquid marketable securities during the year ended December 31, 2017.
Net cash used in investing activities for the year ended December 31, 2016 was $361.8 million, an increase of $11.1 million compared to cash used in investing activities for the year ended December 31, 2015. The change was primarily driven by an increase in cash paid for acquisitions in 2016, partially offset by proceeds from the sale of a non-core line of business within our Industrial and Field Services segment and increased proceeds from the sales of fixed assets and lower capital expenditures in 2016.
Net cash (used in) from financing activities
Net cash used in financing activities for the year ended December 31, 2017 was $72.8 million, a decrease of $293.0 million compared to cash from financing activities for the year ended December 31, 2016. The change was primarily due to the issuance in March 2016 of $250.0 million in additional aggregate principal amount of 5.125% senior unsecured notes due 2021. During the year ended December 31, 2017, there were no net proceeds from issuance of debt as we entered into a $400.0 million senior secured term loan agreement and used the proceeds to purchase approximately $400.0 million aggregate principal amount of our previously outstanding 5.25% senior unsecured notes due 2020. In addition, during the year ended December 31, 2017, we increased repurchases of our common stock from $22.2 million in 2016 to $49.0 million in 2017.
Net cash from financing activities for the year ended December 31, 2016 was $220.2 million, an increase of $310.4 million compared to cash used in financing activities for the year ended December 31, 2015. The change was primarily due to the issuance of $250.0 million in additional aggregate principal amount of 5.125% senior notes due 2021 which we completed on March 17, 2016, as well as lower repurchases of common stock in 2016 as compared to 2015.
Adjusted Free Cash Flow
Management considers adjusted free cash flow to be a measurement of liquidity which provides useful information to both management and investors about our financial strength and our ability to generate cash. Additionally, adjusted free cash flow is a metric on which management incentive compensation is based. We define adjusted free cash flow as net cash from operating activities excluding cash impacts of items derived from non-operating activities, such as taxes paid in connection with divestitures, less additions to property, plant and equipment plus proceeds from sales of fixed assets. Adjusted free cash flow should not be considered an alternative to net cash from operating activities or other measurements under GAAP. Adjusted free cash flow is not calculated identically by all companies, and therefore our measurements of adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.
The following is a reconciliation from net cash from operating activities to adjusted free cash flow for the following periods (in thousands):
 
For the years ended December 31,

(in thousands)
2017
 
2016
Net cash from operating activities
$
285,698

 
$
259,624

Additions to property, plant and equipment
(167,007
)
 
(219,384
)
Proceeds from sale and disposal of fixed assets
7,124

 
20,817

Tax liability on sale of business
14,423

 

Adjusted free cash flow
$
140,238

 
$
61,057

Working Capital
At December 31, 2017, cash and cash equivalents and marketable securities totaled $357.6 million, compared to $307.0 million at December 31, 2016. At December 31, 2017, cash and cash equivalents held by foreign subsidiaries totaled $47.3 million and were readily convertible into other currencies including U.S. dollars. At December 31, 2017, the cash and cash

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equivalents balance for our U.S. operations was $272.1 million, and our U.S. operations had net operating cash flows of $236.3 million for the year ended December 31, 2017. Additionally, we have a $400.0 million revolving credit facility, of which approximately $217.8 million was available to borrow at December 31, 2017. Based on the above and our current plans, we believe that our operations have adequate financial resources to satisfy their current liquidity needs.
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. Our primary ongoing cash requirements will be to fund operations, capital expenditures, interest payments and investments in line with our business strategy. We believe our future operating cash flows will be sufficient to meet our future operating and internal investing cash needs as well as any cash needs relating to our stock repurchase program. Furthermore, our existing cash balances and availability of additional borrowings under our revolving credit facility provide additional potential sources of liquidity should they be required.
Financing Arrangements
The financing arrangements and principal terms of our $400.0 million principal amount of 5.25% senior unsecured notes due 2020, $845.0 million principal amount of 5.125% senior unsecured notes due 2021, and $398.0 million senior secured notes due 2024 which were outstanding at December 31, 2017, and our $400.0 million revolving credit facility, are discussed further in Note 11, “Financing Arrangements,” to our consolidated financial statements included in Item 8 of this report.
As of December 31, 2017, we were in compliance with the covenants of all of our debt agreements, and we believe we will continue to meet such covenants.
Environmental Liabilities
 
As of December 31,
 
2017 over 2016
(in thousands)
2017
 
2016
 
$ Change
 
% Change
Closure and post-closure liabilities
$
61,037

 
$
58,331

 
$
2,706

 
4.6
 %
Remedial liabilities
124,468

 
128,007

 
(3,539
)
 
(2.8
)%
Total environmental liabilities
$
185,505

 
$
186,338

 
$
(833
)
 
(0.4
)%
Total environmental liabilities as of December 31, 2017 were $185.5 million, a decrease of $0.8 million compared to the liabilities as of December 31, 2016. This decrease was primarily due to expenditures of $13.0 million partially offset by accretion of $9.5 million as well as new asset retirement obligations and measurement period adjustments associated with prior period acquisitions of $3.0 million.
We anticipate our environmental liabilities, substantially all of which we assumed in connection with our acquisitions, will be payable over many years and that cash flow from operations will generally be sufficient to fund the payment of such liabilities when required. However, events not anticipated (such as future changes in environmental laws and regulations) could require that such payments be made earlier or in greater amounts than currently anticipated, which could adversely affect our results of operations, cash flow and financial condition.
During each of 2017, 2016 and 2015, we benefited from reductions in our environmental liabilities due to changes in estimates recorded to the statement of operations. The benefits over these years were primarily due to the successful introduction of new technology for remedial activities, favorable results from environmental studies of the on-going remediation, including favorable regulatory approvals, and lower project costs realized by utilizing internal labor and equipment. The principal changes in estimates were from the following items:
In 2017, the net reduction in our environmental liabilities from changes in estimates recorded to the statement of operations was $0.2 million and primarily related to reduced remedial spending at one of our locations resulting from new technologies and cost savings realized during the completed cell closure at one of our landfills.
In 2016, the net reduction in our environmental liabilities from changes in estimates recorded to the statement of operations was $4.3 million and primarily related to reduced remedial spending at one of our locations resulting from new technologies and cost savings realized during the completed cell closure at one of our landfills.
In 2015, the net reduction in our environmental liabilities from changes in estimates recorded to the statement of operations was $11.3 million and primarily related to reductions in the estimates for remedial activities at four locations.  Events which occurred during 2015 and resulted in the changes in estimates were attributable to favorable outcomes from negotiations among potentially responsible parties (or “PRPs”) in which we participate of $3.8 million, work performed by external third-party consultants which we engaged to aid in estimating our future remedial activity costs at certain sites of $4.7

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million, and receiving Provincial approval for a planned expansion of one of our landfills in Canada which will remediate our previously recognized obligations of $2.5 million.
Contractual Obligations
The following table has been included to assist understanding our debt and similar obligations as of December 31, 2017 and our ability to meet such obligations (in thousands):
 
 
 
Payments Due by Period
Contractual Obligations (1)
Total
 
Less than
1 year
 
1-3 years
 
4-5 years
 
After 5 years
Closure, post-closure and remedial liabilities
$
470,076

 
$
20,820

 
$
53,302

 
$
26,783

 
$
369,171

Current and long-term obligations, at par
1,643,000

 
4,000

 
408,000

 
853,000

 
378,000

Interest on current and long-term obligations (2)
291,669

 
78,461

 
147,745

 
45,355

 
20,108

Operating leases
196,845

 
44,476

 
67,394

 
39,605

 
45,370

Total contractual obligations
$
2,601,590

 
$
147,757

 
$
676,441

 
$
964,743

 
$
812,649

___________________________________________
(1) The above amounts do not include the $7.5 million provisional liability recorded as a result of the Tax Act and related to the one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. This liability will be paid over a future eight year period.
(2) Interest on the variable-rate $400.0 million senior secured term loan agreement was calculated based on the effective interest rate as of December 31, 2017 of 3.57%.
The undiscounted value of closure, post- closure and remedial liabilities of $470.1 million is equivalent to the present value of $185.5 million based on discounting of $185.6 million and the undiscounted remainder of $99.0 million to be accrued for closure and post-closure liabilities over the remaining site lives.
The following table has been included to assist in understanding our other contractual obligations as of December 31, 2017 and our ability to meet such obligations (in thousands):
 
 
 
Payments Due by Period
Other Commercial Commitments
Total
 
Less than
1 year
 
1-3 years
 
4-5 years
 
After 5 years
Standby letters of credit
$
134,140

 
$
134,140

 
$

 
$

 
$

We obtained the standby letters of credit described in the above table primarily as security for financial assurances we have been required to provide to regulatory bodies for our hazardous waste facilities and which would be called only in the event that we fail to satisfy closure, post-closure and other obligations under the permits issued by those regulatory bodies for such licensed facilities. See Note 11, "Financing Arrangements," to our consolidated financial statements included in Item 8 of this report for further discussion of our standby letters of credit and other financing arrangements.
Off-Balance Sheet Arrangements
Except for our obligations under operating leases and letters of credit described above under "Contractual Obligations" and performance obligations incurred in the ordinary course of business, we are not party to any off-balance sheet arrangements involving guarantee, contingency or similar obligations to entities whose financial statements are not consolidated with our results, and that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors in our securities.
Capital Expenditures
In 2017, our capital expenditures, net of disposals, were $159.9 million. We anticipate that 2018 capital spending, net of disposals, will be in the range of $170.0 million to $190.0 million. The increase in expected capital expenditures from 2017 to 2018 is primarily driven by incremental ongoing capital requirements from the acquisition of the U.S. Industrial Cleaning Division of Veolia North America, LLC and additional investments in cell construction of our landfills. However, unanticipated changes in environmental regulations could require us to make significant capital expenditures for our facilities and adversely affect our results of operations and cash flow.


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Critical Accounting Policies and Estimates
The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. The following are the areas that we believe require the greatest amount of judgments or estimates in the preparation of the financial statements: revenue allowance, allowance for doubtful accounts, accounting for landfills, non-landfill closure and post-closure liabilities, remedial liabilities, goodwill, permits and other intangible assets, insurance accruals, legal matters, and (benefit) provision for income taxes. Our management reviews critical accounting estimates with the Audit Committee of our Board of Directors on an ongoing basis and as needed prior to the release of our annual financial statements. See also Note 2, "Significant Accounting Policies," to our consolidated financial statements included in Item 8 of this report, which discusses the significant assumptions used in applying our accounting policies.
Revenue Allowance.    Due to the nature of our business and the invoices that result from the services we provide, customers may withhold payments and attempt to renegotiate amounts invoiced. In addition, for some of the services we provide, our invoices are based on quotes that can either generate credits or debits when the actual revenue amount is known. Accordingly, based on our industry knowledge and historical trends, we record a revenue allowance. Increases in overall sales volumes and the expansion of the customer base in recent years have also increased the volume of additions and deductions to the allowance during the year.
Our revenue allowance is intended to cover the net amount of revenue adjustments that may need to be credited to customers' accounts in future periods. We determine the appropriate total revenue allowance by evaluating the following factors on a customer-by-customer basis as well as on a consolidated level: historical collection trends, age of outstanding receivables, existing economic conditions and other information as deemed applicable. Revenue allowance estimates can differ materially from the actual adjustments, but historically our revenue allowance has been sufficient to cover the net amount of the reserve adjustments recorded in subsequent reporting periods.
Allowance for Doubtful Accounts.    We establish an allowance for doubtful accounts to cover accounts receivable that may not be collectible. In establishing the allowance for doubtful accounts, we analyze the collectability of accounts that are large or past due. A considerable amount of judgment is required to make this assessment, based on detailed analysis of the aging of our receivables, the creditworthiness of our customers, our historical bad debts and other adjustments and current economic trends, for instance, seen in the oil and gas markets in Western Canada. Accounts receivable written off in subsequent periods can differ materially from the allowance for doubtful accounts provided, but historically our provision has been adequate.
Landfill Accounting.    We amortize landfill improvements and certain landfill-related permits over their estimated useful lives. The units-of-consumption method is used to amortize land, landfill cell construction, asset retirement costs and remaining landfill cells and sites. We also utilize the units-of-consumption method to record closure and post-closure obligations for landfill cells and sites. Under the units-of-consumption method, we include future estimated construction and asset retirement costs, as well as costs incurred to date, in the amortization base of the landfill assets. Additionally, where appropriate, as discussed below, we include probable expansion airspace yet to be permitted in the calculation of the total remaining useful life of the landfill. If we determine that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time we decide to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.
Landfill Assets. Landfill assets include the costs of landfill site acquisition, permits and cell construction incurred to date. These amounts are amortized under the units-of-consumption method such that the asset is completely amortized when the landfill ceases accepting waste.
Landfill Capacity. Landfill capacity, which is the basis for the amortization of landfill assets and for the accrual of final closure and post-closure obligations, represents total permitted airspace plus unpermitted airspace that management believes is probable of ultimately being permitted based on established criteria. Our management applies the following criteria for evaluating the probability of obtaining a permit for future expansion airspace at existing sites, which provides management a basis to evaluate the likelihood of success of unpermitted expansions: