What changed in this filing

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Item 1A. Risk Factors

2021-02-24 compared with 2020-02-26 · 62 added, 58 removed, 168 unchanged (42% of the section changed)

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Our businesses are subject to operational and safety risks.

Provision of environmental, energy and industrial services to our customers by both 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, damage to or total loss of our property or assets, 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.

Providing environmental and industrial services to our customers by both 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, damage to or total loss of our property or assets, 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 and subcontractors, when necessary, 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 primarily through (i) comprehensive training programs, (ii) our Environmental Health and Safety Compliance Internal Audit Program, (iii) vehicle and equipment maintenance programs and (iv) insurance, such programs and insurance may not be adequate to cover all of our potential liabilities.

While we seek to minimize our exposure to such

risks primarily through (i) comprehensive training programs, (ii) utilizing proper equipment and the latest technologies, (iii) our Environmental Compliance Internal Audit Program, (iv) vehicle and equipment maintenance programs, (v) subcontracting with reputable third-parties and (vi) insurance, such actions and insurance may not be adequate to cover all of our potential liabilities which could negatively impact our results of operations and cash flows.

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

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We may incur significant costs to maintain compliance.

Also, these requirements may increase in the future as a result of statutory and regulatory changes.

Future statutory and regulatory requirements, including any legislation focused on climate change, may require significant cost to comply or may require changes to our products or services.

Regulators, in addition to investors, customers and the public in general, have been increasingly focused on Environmental, Social and Governance ("ESG") and cyber-security practices of companies.

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The occurrence of any of the foregoing could have a material impact on our financial condition or results of operations.

Further, 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 may be required to pay fines/penalties for noncompliance and may incur significant costs to maintain or improve our compliance with such requirements.

Further, although we are very committed to compliance and safety, we could be subject to significant fines and penalties, our reputation could be adversely affected and/or we may incur significant costs to maintain or improve our compliance, if our businesses, or third parties with whom we have a relationship, were to fail to comply with such statutory and regulatory requirements.

Our operations are increasingly dependent upon technology.

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Identification of new and emerging technologies may be a risk and an opportunity to our business.

Research and development of new technologies may require significant spending which may negatively impact our operating results.

Research and development of new technologies may require significant spending which may negatively impact our operating results and cash flows.

Failure to innovate and focus on new technologies that provide superior alternatives to traditional environmental services, waste disposal or oil collection and re-refining service offerings may negatively impact our financial results.

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.

We use computers in substantially all aspects of our business operations and also mobile devices and other online technologies to connect with our employees and customers.

Such uses give rise to cyber security risks, including security breach, espionage, system disruption, theft, disruption of our business operations, remediation costs for repairs of system damage 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.

Our business involves operational technology integral to our day to day business and 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, which could have a material advers affect on our financial position or results of operations.

If we fail to assess and identify current cyber security risks and those associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks.

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 operational technology, information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, damage to our assets, brand reputational damage, violation of privacy laws, loss of customers, potential liability and competitive disadvantage, which could have a material adverse effect on our financial position, results of operations or cash flows.

Although we have from time to time experienced third party attacks on our computer systems which resulted in some business disruption while we responded, we believe that no such attack has resulted in any material disruptions or had any of the other material adverse consequences described above in this paragraph.

Furthermore, while we maintain what we believe is sufficient insurance coverage that may (subject to certain policy terms and

conditions, including deductibles) cover certain aspects of third-party security and cyber-risks and business interruption, our insurance coverage may not always cover all our costs or losses.

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.

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facilities and $58.2 million for our Canadian facilities.

We have obtained all of the required financial assurance for our facilities through a combination of surety bonds, letters of credit and insurance from qualified insurance companies.

We have obtained all of the required financial assurance for our facilities through a combination of surety bonds and insurance from qualified insurance companies.

The financial assurance related to closure and post-closure obligations of our U.S.

facilities will renew in 2020.

Our Canadian facilities utilize surety bonds, which renew at various dates throughout 2020, 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.

and Canadian facilities will renew at various dates throughout 2021.

Our ability to continue operating our facilities and conducting our 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.

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While we endeavor to purchase insurance coverage appropriate to our risk assessment, we are unable to predict with certainty the frequency, nature or magnitude of claims for direct or consequential damages, and as a result our insurance program may not fully cover us for losses we may incur.

In addition, as a result of a number of catastrophic weather and other events, insurance companies have incurred substantial losses and in many cases they have substantially reduced the nature and amount of insurance coverage available to the market, have broadened exclusions and/or have substantially increased the cost of such coverage.

As a result of a number of catastrophic weather and other events, insurance companies have incurred substantial losses and in many cases they have substantially reduced the nature and amount of insurance coverage available to the market, have broadened exclusions and/or have substantially increased the cost of such coverage.

If this trend continues, we may not be able to maintain insurance of the types and coverage we desire at reasonable rates.

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Any future difficulty in obtaining insurance could also impair our ability to secure future contracts, which may be conditioned upon the availability of adequate insurance coverage.

In addition, claims associated with risks for which we are self-insured (workers' compensation, employee medical, comprehensive general liability and vehicle liability) may exceed our recorded reserves, which could negatively impact future earnings.

In addition, claims associated with risks for which we are to some extent self-insured (property, workers' compensation, employee medical, comprehensive general liability and vehicle liability) may exceed our recorded reserves, which could negatively impact future earnings.

Tax interpretations and changes in tax regulations and legislation could adversely affect our results of operations.

We are subject to income taxes in the United States, Canada and various state and local jurisdictions.

Tax interpretations, regulations and legislation in the various jurisdictions in which we operate are subject to change and uncertainty and can impact net income, income tax expense and deferred income tax assets or liabilities.

We are subject to income taxes in the United States, Canada, India and various state and local jurisdictions.

Tax interpretations, regulations and legislation in the various jurisdictions in which we operate are subject to change and uncertainty and may impact our results of operations and cash flows.

Our interpretation of tax rules and regulations, including those relating to foreign jurisdictions, requires judgment that may be challenged by taxation authorities upon audit.

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We earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S.

In fiscal 2019 , we recorded approximately 16.1% of our direct revenues in Canada .

In particular, we recorded approximately 13.9% of our fiscal 2020 direct revenues in Canada.

Because our consolidated financial statements are presented in U.S.

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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.

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 assets or group of assets are contributing to our objectives and growth strategy.

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 assets or groups of assets are contributing to our objectives and growth strategy.

When we decide to sell a business or specific asset group, we may be unable to do so on satisfactory terms and within our anticipated time frame.

We have acquired, and expect generally to acquire, all the outstanding shares of our more significant acquired companies.

Due to this acquisition method 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.

We have acquired, and generally expect to acquire, all the outstanding shares, as opposed to assets, of our more significant acquired companies.

Due to this acquisition method our investment in those companies is 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.

Unknown liabilities or other obligations may adversely affect our financial condition and results of operations.

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Any significant write-offs would adversely affect our balance sheet and results of operations.

Our growth and success are dependent upon key personnel.

Our growth and success are dependent upon our people.

If we lose key personnel and are unable to hire additional qualified personnel in a timely manner, our business may be harmed.

A change or deterioration in our relations with our employees could have a materially adverse effect on our business, financial condition and results of operations.

Our ability to continue to grow, operate our facilities and provide our services is dependent upon the expertise of certain key managerial and technical personnel.

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Our ability to retain key personnel and/or attract new qualified personnel may have an impact on our business and financial results.

Natural disasters or other catastrophic events could negatively affect our business, financial condition and results of operations.

Natural disasters such as hurricanes, tornados 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 workforce in a market and the temporary disruption in rail or truck transportation services upon which we rely.

These events could prevent or delay shipments and reduce both volumes and revenue.

We put the safety of our employees at the heart of what we do and believe we have a positive relationship with our workforce.

However, if our relationship with our employees were to deteriorate we could be required to incur additional costs related to wages and benefits, inefficiencies in operations, unanticipated costs in sourcing temporary or third-party labor and interference with customer relations.

Natural disasters or other catastrophic events, including pandemics, could negatively affect our business, financial condition and results of operations.

Natural disasters such as hurricanes, tornados or earthquakes or other catastrophic events including public health threats or outbreaks of communicable diseases such as the recent COVID-19 pandemic could negatively affect our operations and financial performance.

The impact of such events could include physical damage to one or more of our facilities or equipment, the temporary lack of an adequate workforce in a market and the temporary disruption in rail or truck transportation services upon which we rely.

These events could prevent or delay shipments from suppliers or to customers 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 operations.

These events could adversely impact the ability of the Company's suppliers and customers to conduct business activities and could ultimately do so for an indefinite period of time.

As a result, 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 operations.

Additional Risks Affecting Our Environmental Services Business

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We have accrued environmental liabilities valued as of December 31, 2020 at $202.7 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 (including 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 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 (including 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, results of operations and cash flows.

We may also assume additional environmental liabilities as part of future acquisitions.

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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.

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.

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.

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To the extent that such estimates, or the assumptions used to make those estimates, prove to be significantly different than actual results, or our beliefs that we will receive expansion permits change adversely in a significant manner, our landfill assets, including the assets incurred in the pursuit of the expansion, may be subject to impairment.

Furthermore, lower prospective profitability may result due to increased interest accretion and depreciation or asset impairment charges 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.

Further, 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.

A significant portion of our Environmental Services business depends upon the demand for cleanup of major spills and other remedial projects and regulatory developments over which we have no control.

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Additional Risks Affecting 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 ("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 these oil products.

The prices at which we sell these oil products can also be 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 these oil products.

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 these oil products 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 these

oil products 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 such oil products decline.

These risks are exacerbated when there are rapid fluctuations in these oil indices.

Reductions in the demand for oil products and automotive services in the markets we serve may negatively affect our Safety-Kleen business.

Reduced demand for oil products, whether temporary due to market conditions or a lasting trend, may also lower demand for our services of collecting used oil and, in turn, reduce our feedstock oil volumes for processing through our re-refineries.

There are significant fixed costs associated with operating our re-refinery facilities and should production volumes at these facilities decrease, our results of operations and profitability may be materially impacted.

Safety-Kleen's core service offerings are inextricably connected to the automotive industry.

Miles driven and routine automotive maintenance, along with other automotive industry trends, impact demand for parts-washer services, containerized waste collections and vacuum services.

Declines in this industry, whether temporary or a lasting trend, may reduce the demand for these core service offerings which may adversely impact our financial results.

Environmental laws and regulations have adversely affected and may adversely affect Safety-Kleen's parts cleaning and other solvent related services.

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Our ability to make scheduled payments of principal or interest with respect to our debt, including our outstanding senior unsecured notes, our secured term loans, any revolving loans and our finance 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 are 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.

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 agreements 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.

Although our revolving credit agreement and the indenture 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, as of December 31, 2020, we had up to approximately $264.0 million available 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.

Our revolving credit agreement and the indenture 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.

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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 other things, the extent to which the Company or our restricted subsidiaries can:

Our revolving credit agreement and the indenture and loan agreement governing our other outstanding debt limit, among other things, the extent to which the Company or our restricted subsidiaries can:

• incur or guarantee additional indebtedness (including, for this purpose, reimbursement obligations under letters of credit) or issue preferred stock;

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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.

If amounts outstanding under such debts were accelerated, our assets might not be sufficient to repay in full those debts.

Our revolving credit agreement and the indenture 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.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors