CLEAN HARBORS INC 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the normal course of business, we are exposed to market risks, including changes in interest rates and certain foreign currency rates, primarily relating to the Canadian dollar. Interest Rate Risk Our philosophy in managing interest rate risk is to maintain a debt portfolio inclusive of both variable and fixed-rate debt so as to limit our exposure to interest rate volatility. As of December 31, 2022, before taking into account any interest rate swap agreements then in place, we held $1.6 billion of variable rate debt under our senior secured term loans due 2024 and 2028. The senior secured term loans due 2024 ("2024 Term Loans") paid interest at Eurodollar rate (one-month LIBOR at December 31, 2022) plus 1.75%. The senior secured term loans due 2028 ("2028 Term Loans") also paid interest at the Eurodollar rate (currently one-month LIBOR) plus 2.00%. To hedge interest rate exposure on a portion of this outstanding variable debt, we entered into interest rate swap agreements. Under the terms of the interest rate swaps entered into in 2018 ("2018 Swaps"), which hedge the interest rate exposure of the 2024 Term Loans we receive interest based on the one-month LIBOR index and we pay interest at a weighted average rate of approximately 2.92% on a notional amount of $350.0 million. When combined with the 1.75% interest rate margin for Eurocurrency borrowings under the 2024 Term Loans, the effective annual interest rate on such $350.0 million aggregate principal amount of 2024 Term Loans is 4.67%. The remaining balance of the 2024 Term Loans subject to interest rate risk as of December 31, 2022 was $264.0 million. Under the terms of the interest rate swaps entered into in 2022 ("2022 Swaps"), which hedge the interest rate exposure on the 2028 Term Loans, we receive interest based on the variable rates on the 2028 Term Loans and we pay a fixed amount of interest. For more information on the structure of the 2028 Term Loans or 2022 Swaps, see Note 12, "Financing Arrangements," to our consolidated financial statements included in Item 8 of this report. As of December 31, 2022, the Company received interest based on the one-month LIBOR index and paid interest at a weighted average rate of approximately 0.931% on a notional amount of $600.0 million. When combined with the 2.00% interest rate margin for Eurocurrency borrowings under the 2028 Term Loans, the effective annual interest rate on such $600.0 million aggregate principal amount of the 2028 Term Loans was 2.931%. The remaining balance of the 2028 Term Loans subject to interest rate risk as of December 31, 2022 was $390.0 million. We designated our interest rate swap agreements as effective cash flow hedges at inception, and therefore the change in fair value is recorded in stockholders' equity as a component of accumulated other comprehensive loss and included in interest expense at the same time as interest expense is affected by the hedged transactions. Differences paid or received over the life of the agreements are recorded as additions to or reductions of interest expense on the underlying debt. After taking into account the 2018 Swaps and the 2022 Swaps, as of December 31, 2022, we fixed our interest rate exposure on $950.0 million of our debt, leaving $654.0 million of debt subject to interest rate risk. The following table provides information regarding our total borrowings at December 31, 2022 (in thousands): Scheduled Maturity Dates 2023 2024 2025 2026 2027 Thereafter Total Senior secured term loans due 2024 $ — $ 613,975 $ — $ — $ — $ — $ 613,975 Senior secured term loans due 2028 10,000 10,000 10,000 10,000 10,000 940,000 990,000 Unsecured senior notes due 2027 — — — — 545,000 — 545,000 Unsecured senior notes due 2029 — — — — — 300,000 300,000 Long term debt, at par $ 10,000 $ 623,975 $ 10,000 $ 10,000 $ 555,000 $ 1,240,000 $ 2,448,975 The interest rate on the $545.0 million senior unsecured notes due July 15, 2027 is fixed at 4.875%. Interest payments on this debt are due semiannually on January 15 and July 15 in the amount of $13.3 million upon each date. The interest rate on the $300.0 million senior unsecured notes due July 15, 2029 is fixed at 5.125%. Interest payments on these $300.0 million senior unsecured notes are also due semiannually on January 15 and July 15 in the amount of $7.7 million upon each date. In January 2023, we issued $500.0 million principal amount of 6.375% unsecured senior notes due February 1, 2031 ("2031 Notes"). Interest payments on this debt are due semiannually on February 1 and August 1 in the amount of $15.9 million upon each date starting in August of 2023. The net proceeds of issuing the 2031 Notes, along with a $114.0 million borrowing under our existing revolving credit facility and cash on hand, were used to repay the aggregate principal balance of our 2024 Term Loans. In connection with this, 45 Table Of Contents we also terminated our 2018 Swaps and received a cash payment of $8.7 million from the counterparties to the 2018 Swaps relating to such termination. Subsequent to these events in January 2023, which are also detailed in Note 12, "Financing Arrangements," to our consolidated financial statements included in Item 8 of this report, our outstanding debt subject to interest rate risk was limited to $390.0 million of the 2028 Term Loans and the $114.0 million borrowing under our existing revolving credit facility, the latter of which bears interest at a rate of LIBOR plus 1.50% and is payable monthly. Should the average interest rate on our total variable rate debt of $504.0 million change by 100 basis points, we estimate that our average annual interest expense would change by up to approximately $5.8 million. After that borrowing of $114.0 million, we now have approximately $174.6 million of additional capacity available under our revolving credit facility when taking into account the $400.0 million limit and the $111.4 million of letters of credit outstanding. This additional capacity would be subject to interest rate variability should we decide to borrow additional funds under our revolving credit facility. Foreign Currency Risk We view our investment in our foreign subsidiaries as long-term; thus, we have not entered into any hedging transactions between any two foreign currencies or between any of the foreign currencies in which we transact business and the U.S. Dollar. Given our significant investment in Canada and the fluctuations that have and can occur between the U.S. Dollar and Canadian Dollar exchange rates, significant movements in cumulative translation adjustment amounts recorded as a component of other comprehensive loss can occur in any given period. During 2022, our Canadian subsidiaries transacted a portion of their business in U.S. Dollars and at any period end had cash on deposit in U.S. Dollars and outstanding U.S. Dollar accounts receivable and payable balances related to their operations. Those U.S. denominated balances are subject to foreign currency gains or losses. Exchange rate movements also affect the translation of Canadian generated profits and losses into U.S. Dollars. Had the Canadian Dollar been 10.0% stronger or weaker against the U.S. Dollar, we would have reported increased or decreased net income of $12.8 million for the year ended December 31, 2022. 46 Table Of Contents TEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page No Report of Independent Registered Public Accounting Firm (PCA OB ID No. 34 ) 48 Consolidated Balance Sheets 50 Consolidated Statements of Operations 51 Consolidated Statements of Comprehensive Income 52 Consolidated Statements of Cash Flows 53 Consolidated Statements of Stockholders' Equity 54 Notes to Consolidated Financial Statements 55 (1) Operations 55 (2) Significant Accounting Policies 55 (3) Revenues 63 (4) Business Combinations 67 ( 5 ) Disposition o f Business 69 ( 6 ) Inventories and Supplies 70 ( 7 ) Property, Plant and Equipment 70 ( 8 ) Goodwill and Other Intangible Assets 71 ( 9 ) Accrued Expenses 72 ( 10 ) Closure and Post-Closure Liabilities 73 (1 1 ) Remedial Liabilities 74 (1 2 ) Financing Arrangements 76 (1 3 ) Income Taxes 79 (1 4 ) Earnings Per Share 81 (1 5 ) Stockholders' Equity 81 (16) Accumulated Other Comprehensive Loss 82 (1 7 ) Stock Based Compensation 82 (1 8 ) Commitments and Contingencies 83 (1 9 ) Leases 85 ( 20 ) Segment Reporting 87 47 Table Of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Clean Harbors, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Clean Harbors, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, cash flows and stockholders’ equity, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Remedial Liabilities - Refer to Note 2 and Note 11 to the financial statements Critical Audit Matter Description Remedial liabilities include the costs of removal or containment of contaminated material, the treatment of potentially contaminated groundwater and maintenance and monitoring costs necessary to comply with regulatory requirements. The estimate of remedial liabilities involves an analysis of numerous factors that are inherently difficult to estimate and involve a significant amount of judgment. The Company routinely reviews and evaluates the sites for which remedial liabilities have been recognized to determine if there should be changes in the cost estimates. As a result, the valuation of liabilities is subject to material changes as additional information becomes available, particularly as it relates to changes in technologies and changes in laws and regulations that govern the remediation efforts. Total remedial liabilities recorded as of December 31, 2022 were $ 116.3 million. Given the subjectivity and judgment involved in measuring remedial liabilities, auditing remedial liabilities involved especially subjective judgment and an increased extent of effort, including the need to involve our specialists who have expertise in environmental remediation. 48 Table Of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to remedial liabilities included the following, among others: • We tested the effectiveness of controls related to the recognition and measurement of remedial liabilities, including those controls over changes in estimates. • We evaluated management’s ability to accurately forecast future cash flows by comparing actual results to management’s historical forecasts through retrospective reviews. • We evaluated the methods and assumptions used by management to estimate the remedial liabilities by confirming specific facts and circumstances related to a selection of sites with project managers and other Company personnel responsible for monitoring these sites, including legal counsel. • With the assistance of auditor specialists who have expertise in environmental matters and specialized skills and training, we evaluated the reasonableness of the Company’s estimates by: – Searching for information in the public domain for completeness of sites identified for remediation. – Assessing the completeness of the Company’s costs estimates for a selection of sites, specifically, comparing the costs estimates to relevant regulatory guidelines and specifications. – Testing the accuracy of the amounts recorded for a selection of sites, specifically, verifying the mathematical accuracy of the calculation, agreeing cost components to supporting documents, and/or developing an independent range of cost estimates. /s/ Deloitte & Touche LLP Boston, Massachusetts March 1, 2023 We have served as the Company's auditor since 2005. 49 Table Of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) As of December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 492,603 $ 452,575 Short-term marketable securities 62,033 81,724 Accounts receivable, net of allowances aggregating $ 45,253 and $ 40,140 , respectively 964,603 792,734 Unbilled accounts receivable 107,010 94,963 Inventories and supplies 324,994 250,692 Prepaid expenses and other current assets 82,518 68,483 Total current assets 2,033,761 1,741,171 Property, plant and equipment, net 1,980,302 1,863,175 Other assets: Operating lease right-of-use assets 166,181 161,797 Goodwill 1,246,878 1,227,042 Permits and other intangibles, net 620,782 644,912 Other 81,803 15,602 Total other assets 2,115,644 2,049,353 Total assets $ 6,129,707 $ 5,653,699 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 10,000 $ 17,535 Accounts payable 446,629 359,866 Deferred revenue 94,094 83,749 Accrued expenses and other current liabilities 396,716 391,414 Current portion of closure, post-closure and remedial liabilities 23,123 25,136 Current portion of operating lease liabilities 49,532 47,614 Total current liabilities 1,020,094 925,314 Other liabilities: Closure and post-closure liabilities, less current portion of $ 13,205 and $ 12,015 , respectively 105,596 87,088 Remedial liabilities, less current portion of $ 9,918 and $ 13,121 , respectively 106,372 98,752 Long-term debt, less current portion 2,414,828 2,517,024 Operating lease liabilities, less current portion 119,259 117,991 Deferred tax liabilities 350,389 314,853 Other long-term liabilities 90,847 78,790 Total other liabilities 3,187,291 3,214,498 Commitments and contingent liabilities (See Note 18) Stockholders' equity: Common stock, $ 0.01 par value: Authorized 80,000,000 shares; issued and outstanding 54,064,797 and 54,419,321 shares, respectively 541 544 Additional paid-in capital 504,240 536,377 Accumulated other comprehensive loss ( 167,181 ) ( 196,012 ) Accumulated earnings 1,584,722 1,172,978 Total stockholders' equity 1,922,322 1,513,887 Total liabilities and stockholders' equity $ 6,129,707 $ 5,653,699 The accompanying notes are an integral part of these consolidated financial statements. 50 Table Of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) For the years ended December 31, 2022 2021 2020 Revenues: Service revenues $ 4,133,184 $ 3,048,019 $ 2,724,584 Product revenues 1,033,421 757,547 419,513 Total revenues 5,166,605 3,805,566 3,144,097 Cost of revenues: (exclusive of items shown separately below) Service revenues 2,892,726 2,105,043 1,786,718 Product revenues 651,204 504,794 351,033 Total cost of revenues 3,543,930 2,609,837 2,137,751 Selling, general and administrative expenses 627,391 537,962 451,044 Accretion of environmental liabilities 12,943 11,745 11,051 Depreciation and amortization 347,594 298,135 292,915 Income from operations 634,747 347,887 251,336 Other income (expense), net 2,472 ( 515 ) ( 290 ) Loss on early extinguishment of debt ( 422 ) — — Gain (loss) on sale of businesses 8,864 — ( 3,376 ) Interest expense, net of interest income of $ 4,607 , $ 2,218 and $ 3,462 , respectively ( 107,663 ) ( 77,657 ) ( 73,120 ) Income before provision for income taxes 537,998 269,715 174,550 Provision for income taxes 126,254 66,468 39,713 Net income $ 411,744 $ 203,247 $ 134,837 Earnings per share: Basic $ 7.59 $ 3.73 $ 2.43 Diluted $ 7.56 $ 3.71 $ 2.42 Shares used to compute earnings per share — Basic 54,223 54,514 55,479 Shares used to compute earnings per share — Diluted 54,487 54,761 55,690 The accompanying notes are an integral part of these consolidated financial statements. 51 Table Of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) For the years ended December 31, 2022 2021 2020 Net income $ 411,744 $ 203,247 $ 134,837 Other comprehensive income (loss), net of tax: Unrealized loss on available-for-sale securities ( 413 ) ( 285 ) ( 8 ) Unrealized gain (loss) on fair value of interest rate hedge 61,124 6,235 ( 20,970 ) Reclassification adjustment for interest rate hedge amounts realized in net income ( 683 ) 10,011 8,180 Unfunded pension liability 318 1,094 ( 189 ) Foreign currency translation adjustments ( 31,515 ) ( 1,590 ) 11,561 Other comprehensive income (loss), net of tax 28,831 15,465 ( 1,426 ) Comprehensive income $ 440,575 $ 218,712 $ 133,411 The accompanying notes are an integral part of these consolidated financial statements. 52 Table Of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the years ended December 31, 2022 2021 2020 Cash flows from operating activities: Net income $ 411,744 $ 203,247 $ 134,837 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 347,594 298,135 292,915 Allowance for doubtful accounts 7,783 8,018 10,133 Amortization of deferred financing costs and debt discount 6,301 4,245 3,666 Accretion of environmental liabilities 12,943 11,745 11,051 Changes in environmental liability estimates 8,272 2,979 10,698 Deferred income taxes 17,549 1,482 ( 9,748 ) Other (income) expense, net ( 2,472 ) 515 290 Stock-based compensation 26,844 18,839 18,502 (Gain) loss on sale of businesses ( 8,864 ) — 3,376 Loss on early extinguishment of debt 422 — — Environmental expenditures ( 13,946 ) ( 15,506 ) ( 12,401 ) Changes in assets and liabilities, net of acquisitions: Accounts receivable and unbilled accounts receivable ( 201,087 ) ( 96,551 ) 22,422 Inventories and supplies ( 74,547 ) ( 31,689 ) ( 7,933 ) Other current and non-current assets ( 17,303 ) 9,268 ( 12,602 ) Accounts payable 74,460 108,398 ( 80,328 ) Other current and long-term liabilities 30,521 22,872 45,719 Net cash from operating activities 626,214 545,997 430,597 Cash flows used in investing activities: Additions to property, plant and equipment ( 345,056 ) ( 241,856 ) ( 196,256 ) Proceeds from sale and disposal of fixed assets 8,779 22,156 9,623 Acquisitions, net of cash acquired ( 86,278 ) ( 1,253,232 ) ( 8,839 ) Additions to intangible assets including costs to obtain or renew permits ( 1,966 ) ( 3,848 ) ( 2,029 ) Purchases of available-for-sale securities ( 49,845 ) ( 129,234 ) ( 70,891 ) Proceeds from sale of available-for-sale securities 68,611 98,412 61,220 Proceeds from sale of businesses, net of transactional costs 16,811 — 7,712 Net cash used in investing activities ( 388,944 ) ( 1,507,602 ) ( 199,460 ) Cash flows (used in) from financing activities: Change in uncashed checks 552 ( 1,806 ) 5,404 Tax payments related to withholdings on vested restricted stock ( 8,801 ) ( 10,805 ) ( 5,331 ) Repurchases of common stock ( 50,183 ) ( 54,410 ) ( 74,844 ) Deferred financing costs paid ( 410 ) ( 13,737 ) ( 2,171 ) Payments on finance leases ( 12,821 ) ( 8,458 ) ( 4,469 ) Principal payments on debt ( 115,652 ) ( 7,535 ) ( 7,535 ) Proceeds from issuance of debt, net of discount — 995,000 — Borrowings from revolving credit facility — — 150,000 Payments on revolving credit facility — — ( 150,000 ) Net cash (used in) from financing activities ( 187,315 ) 898,249 ( 88,946 ) Effect of exchange rate change on cash ( 9,927 ) ( 3,170 ) 4,919 Increase (decrease) in cash and cash equivalents 40,028 ( 66,526 ) 147,110 Cash and cash equivalents, beginning of year 452,575 519,101 371,991 Cash and cash equivalents, end of year $ 492,603 $ 452,575 $ 519,101 Supplemental information: Cash payments for interest and income taxes: Interest paid $ 105,643 $ 73,440 $ 72,535 Income taxes paid, net of refunds 78,526 65,192 53,123 Non-cash investing activities: Property, plant and equipment accrued 30,950 19,264 3,536 Remedial liability assumed in acquisition of property, plant and equipment 8,092 — — The accompanying notes are an integral part of these consolidated financial statements. 53 Table Of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Stockholders' Equity Number of Shares $ 0.01 Par Value Accumulated Earnings Balance at January 1, 2020 55,798 $ 558 $ 644,412 $ ( 210,051 ) $ 834,894 $ 1,269,813 Net income — — — — 134,837 134,837 Other comprehensive loss — — — ( 1,426 ) — ( 1,426 ) Stock-based compensation — — 18,502 — — 18,502 Issuance of common stock for restricted share vesting, net of employee tax withholdings 179 2 ( 5,333 ) — — ( 5,331 ) Repurchases of common stock ( 1,204 ) ( 12 ) ( 74,832 ) — — ( 74,844 ) Balance at December 31, 2020 54,773 548 582,749 ( 211,477 ) 969,731 1,341,551 Net income — — — — 203,247 203,247 Other comprehensive income — — — 15,465 — 15,465 Stock-based compensation — — 18,839 — — 18,839 Issuance of common stock for restricted share vesting, net of employee tax withholdings 235 2 ( 10,807 ) — — ( 10,805 ) Repurchases of common stock ( 589 ) ( 6 ) ( 54,404 ) — — ( 54,410 ) Balance at December 31, 2021 54,419 544 536,377 ( 196,012 ) 1,172,978 1,513,887 Net income — — — — 411,744 411,744 Other comprehensive income — — — 28,831 — 28,831 Stock-based compensation — — 26,844 — — 26,844 Issuance of common stock for restricted share vesting, net of employee tax withholdings 183 2 ( 8,803 ) — — ( 8,801 ) Repurchases of common stock ( 537 ) ( 5 ) ( 50,178 ) — — ( 50,183 ) Balance at December 31, 2022 54,065 $ 541 $ 504,240 $ ( 167,181 ) $ 1,584,722 $ 1,922,322 The accompanying notes are an integral part of these consolidated financial statements. 54 Table Of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) OPERATIONS Clean Harbors, Inc., through its subsidiaries (collectively, the "Company"), is a leading provider of sustainable environmental and industrial services throughout North America. The Company is also the largest re-refiner and recycler of used oil and the premier provider of parts cleaning and related environmental services to commercial, industrial and automotive customers in North America. (2) SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements of the Company reflect the application of certain significant accounting policies as described below: Principles of Consolidation The accompanying consolidated financial statements include the accounts of Clean Harbors, Inc. and its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the Company's consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable at the time under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and disclosure, if any, of contingent assets and liabilities and reported amounts of revenues and expenses. Actual results could differ from those estimates and judgments. Cash, Cash Equivalents, Marketable Securities and Uncashed Checks Cash consists primarily of cash on deposit and money market accounts. The Company, through its wholly-owned captive insurance subsidiary, invests in marketable securities. Marketable securities with maturities of three months or less from the date of purchase are classified as cash equivalents. As of December 31, 2022 and 2021, the Company had total marketable securities as follows (in thousands): December 31, 2022 December 31, 2021 Commercial paper $ 5,035 $ — U.S. Treasury securities 28,973 — Total cash equivalents 34,008 — U.S. Treasury securities — 901 Municipal bonds 1,930 1,978 Commercial paper 24,075 21,160 Corporate notes and bonds 36,028 57,685 Total marketable securities 62,033 81,724 Total $ 96,041 $ 81,724 Realized gains and losses on sales of available-for-sale marketable securities in the years presented were immaterial. The majority of the marketable securities have a remaining maturity of less than one year and fair value approximates cost. The Company's cash management program with its revolving credit lender allows for the maintenance of a zero balance in the U.S. bank disbursement accounts that are used to issue vendor and payroll checks. When checks are presented to the bank for payment, cash deposits in amounts sufficient to fund the checks are made, at the Company's discretion, either from funds provided by other accounts or under the terms of the Company's revolving credit facility. Checks that have been written to vendors or employees but have not yet been presented for payment at the Company's bank are classified as uncashed checks as 55 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) part of accounts payable and changes in the balance are reported as a financing activity in the consolidated statements of cash flows. Allowance for Doubtful Accounts and Revenue Allowance On a regular basis, the Company evaluates its accounts receivable and establishes the allowance for doubtful accounts based on an evaluation of certain criteria and evidence of collection uncertainty including historical collection trends, reasonable expectations of future collections, current economic trends and changes in customer payment patterns. Past-due receivable balances are written off when the Company's collection efforts have been deemed unsuccessful in collecting the outstanding balance due. Due to the nature of the Company's businesses and the invoices that result from the services provided, customers may withhold payments and attempt to renegotiate amounts invoiced. In addition, for some of the services provided, the Company's invoices are based on quotes that, in limited instances can result in adjustments to revenue subsequent to billing. Based on industry knowledge and historical trends, the Company records a revenue allowance in anticipation of these expected adjustments. This practice causes the volume of activity flowing through the revenue allowance during the year to be higher than the balance at the end of the year. The revenue allowance is intended to cover the net amount of revenue adjustments that may need to be credited to customers' accounts in future periods. Management determines the appropriate total revenue allowance by evaluating the following factors on an invoice-by-invoice basis as well as on a consolidated level: trends in adjustments to previously billed amounts, existing economic conditions, communications with customers and other information as deemed applicable. Revenue allowance estimates can differ from the actual adjustments, but historically the revenue allowance has been sufficient to cover the net amount of the reserve adjustments issued in subsequent reporting periods. The following table reflects the activity in the allowance for doubtful accounts and revenue allowance (in thousands): Allowance for Doubtful Accounts Revenue Allowance 2022 2021 2020 2022 2021 2020 Balance at January 1, $ 24,136 $ 24,634 $ 22,493 $ 16,004 $ 20,115 $ 16,218 Additions charged to earnings 7,783 8,018 10,133 54,836 34,319 45,784 Deductions from reserves, net of recoveries ( 7,260 ) ( 8,516 ) ( 7,992 ) ( 50,246 ) ( 38,430 ) ( 41,887 ) Balance at December 31, $ 24,659 $ 24,136 $ 24,634 $ 20,594 $ 16,004 $ 20,115 Credit Concentration Concentration of credit risks in accounts receivable is limited due to the large number of customers comprising the Company's customer base throughout North America. The Company maintains policies over credit extension that include credit evaluations, credit limits and collection monitoring procedures on a customer-by-customer basis. However, the Company generally does not require collateral before services are performed. No individual customer accounted for more than 10% of accounts receivable or more than 10% of total direct revenues in the periods presented. Inventories and Supplies Inventories are stated at the lower of cost or market. The cost of oil and oil products as well as the cost of supplies and drums, solvent and solution and other inventories is principally determined on a first-in, first-out ("FIFO") basis. The Company continually reviews its inventories for obsolete or unsalable items and adjusts its carrying value to reflect estimated realizable values. Property, Plant and Equipment, net (excluding landfill assets and finance lease right-of-use assets) Property, plant and equipment, net is stated at cost less accumulated depreciation. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Items of an ordinary repair or maintenance nature are charged directly to operating expense as incurred. During the construction and development period of an asset, the costs incurred, including interest expense, are classified as construction-in-progress. When the asset is ready for its intended use, the asset is reclassified to an appropriate asset classification and depreciation or amortization commences. The Company 56 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) depreciates and amortizes the capitalized cost of these assets, using the straight-line method as follows: Asset Classification Estimated Useful Life Buildings and building improvements Buildings 20 - 42 years Leasehold and building improvements 2 - 45 years Camp and lodging equipment 8 - 15 years Vehicles 2 - 15 years Equipment Capitalized software and computer equipment 3 - 5 years Containers and railcars 8 - 16 years All other equipment 4 - 30 years Furniture and fixtures 5 - 8 years Gains and losses on the sale of property, plant and equipment are included in Other income (expense), net. Fully depreciated assets are retained in property, plant and equipment and accumulated depreciation until they are removed from service. The Company tests asset groups for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment in the carrying value of long-lived assets is recognized if the expected future undiscounted cash flows derived from the assets, or group of assets, are less than their carrying value. The Company did not record any impairment charges related to long-lived assets in the periods presented. Business Combinations In accordance with the acquisition method of accounting, the purchase price paid for an acquisition is allocated to the assets and liabilities acquired based upon their estimated fair values as of the acquisition date, with the excess of the purchase price over the net assets acquired recorded as goodwill. As required, a preliminary fair value is determined once a business is acquired, with the final determination of the fair value being completed no later than one year from the date of acquisition. Goodwill Goodwill is comprised of the purchase price of business acquisitions in excess of the fair value of the net assets acquired. Goodwill is reviewed for impairment annually as of December 31 or when events or changes in the business environment indicate the carrying value of a reporting unit may exceed its fair value. This review is performed by comparing the fair value of each reporting unit to its carrying value, including goodwill. If the fair value is less than the carrying amount, a loss is recorded for the excess of the carrying value over the fair value up to the carrying amount of goodwill. The Company determines its reporting units by identifying the components of each operating segment. As of December 31, 2022, the Company had three reporting units consisting of, Environmental Sales and Service, Environmental Facilities and Safety-Kleen Sustainability Solutions. See Note 8, "Goodwill and Other Intangible Assets," for additional information related to the Company's goodwill impairment tests. Permits and Other Intangibles Costs related to acquiring licenses, permits and intangible assets, such as legal fees, site surveys, engineering costs and other expenditures are capitalized. Other intangible assets consist primarily of customer and supplier relationships, trademarks and trade names and developed technology. Permits relating to landfills are amortized on a units-of-consumption basis. All other permits are amortized over periods ranging from five to 30 years on a straight-line basis. Finite-lived other intangible assets are amortized on a straight-line basis over their respective useful lives, which range from two to 25 years. All finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When such factors and circumstances exist, management compares the projected undiscounted future cash flows associated with the related asset or group of assets to the carrying amount. The impairment loss, if any, is measured as the excess of the carrying amount over the fair value of the asset or group of assets. 57 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Indefinite-lived intangible assets are not amortized but are reviewed for impairment annually as of December 31, or when events or changes in the business environment indicate that the carrying value may be impaired. If the fair value of the asset is less than the carrying amount, the impairment loss is measured as the excess of the carrying value of the asset over its fair value. Landfill Accounting The Company amortizes landfill improvements and certain landfill-related permits over the 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. The Company also utilizes the units-of-consumption method to record closure and post-closure obligations for landfill cells and sites. Under the units-of-consumption method, the Company includes 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 described below, the Company includes probable expansion airspace that has yet to be permitted in the calculation of the total remaining useful life of the landfill. If it is determined that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, the Company may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time the Company makes the decision 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 recorded at cost, which includes capitalized interest as applicable. Landfill assets, net of amortization, are combined with management's estimate of the costs required to complete construction of the landfill to determine the amount to be amortized over the remaining estimated useful economic life of a site. Amortization of landfill assets is recorded on a units-of-consumption basis, such that the landfill assets should be completely amortized at the date the landfill ceases accepting waste. Amortization totaled $ 16.2 million, $ 13.7 million and $ 10.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. Changes in the determination of when the landfill will cease accepting waste, either through a business decision by the Company, determination that expansion capacity should no longer be considered probable or changes in estimates on annual airspace consumption, will impact the amortization expense of the landfill assets. Changes in estimated costs to complete construction are applied prospectively to the amortization rate. 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 highly probable of ultimately being permitted. As of December 31, 2022, there were no unpermitted expansions included in the Company's landfill accounting model. If actual expansion airspace is significantly different from management's estimate of expansion airspace, the amortization rates used for the units-of-consumption method would change, therefore impacting the Company's profitability. As of December 31, 2022, the Company had nine active landfill sites including the Company's two non-commercial landfills. It is anticipated that the non-commercial landfill at the Deer Park, Texas incineration facility will reach its permitted capacity early in 2023 at which point the Company will commence closure activities. This landfill has been excluded from the table below which includes the estimated remaining lives (based on anticipated waste volumes and remaining highly probable airspace) for the remaining eight landfills, as follows: Facility Name Location Remaining Lives (Years) Permitted Remaining Highly Probable Airspace (cubic yards) (in thousands) Buttonwillow California 20 5,197 Deer Trail Colorado 23 1,488 Grassy Mountain Utah 39 4,454 Kimball Nebraska 5 116 Lambton Ontario, Canada 47 4,443 Lone Mountain Oklahoma 16 3,412 Ryley Alberta, Canada 37 5,851 Sawyer North Dakota 83 3,309 28,270 At December 31, 2022 and 2021, the Company had no cubic yards of permitted, but not highly probable, airspace. 58 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents the remaining highly probable airspace from January 1, 2021 through December 31, 2022 (in thousands of cubic yards): 2022 2021 Remaining capacity, beginning of year 23,784 24,716 Changes in highly probable airspace, net 5,579 — Consumed ( 1,093 ) ( 932 ) Remaining capacity, end of year 28,270 23,784 In the year ended December 31, 2022, the Company received a permit for the expansion of its Ryley landfill in Alberta, Canada. In the year ended December 31, 2021, the Company had no changes in highly probable airspace. Amortization of cell construction costs and accrual of cell closure obligations —Landfills are typically comprised of a number of cells, which are constructed within a defined acreage (or footprint). The cells are typically discrete units, which require both separate construction and separate capping and closure procedures. Cell construction costs are the costs required to excavate and construct the landfill cell. These costs are typically amortized on a units-of-consumption basis, such that they are completely amortized when the specific cell ceases accepting waste. In some instances, the Company has landfills that are engineered and constructed as "progressive trenches." In progressive trench landfills, a number of contiguous cells form a progressive trench. In those instances, the Company amortizes cell construction costs over the airspace within the entire trench, such that the cell construction costs will be fully amortized at the end of the trench useful life. The design and construction of a landfill does not create a landfill asset retirement obligation. Rather, the asset retirement obligation for cell closure (the cost associated with capping each cell) is incurred in relatively small increments as waste is placed in the landfill. Therefore, the cost required to construct the cell cap is capitalized as an asset retirement cost and a liability of an equal amount is established, based on the discounted cash flow associated with each capping event, as airspace is consumed. Spending for cell capping is reflected as environmental expenditures within operating activities in the consolidated statements of cash flows. Landfill final closure and post-closure liabilities —The balance of landfill final closure and post-closure liabilities at December 31, 2022 and 2021 was $ 62.3 million and $ 53.4 million, respectively. The Company has material financial commitments for the costs associated with requirements of the Environmental Protection Agency ("EPA") and the comparable regulatory agency in Canada for landfill final closure and post-closure activities. The Company develops estimates for the cost of these activities based on an evaluation of site-specific facts and circumstances, including the Company's interpretation of current regulatory requirements and proposed regulatory changes. Such estimates may change in the future due to various circumstances including, but not limited to, permit modifications, changes in legislation or regulations, technological changes and results of environmental studies. Final closure costs are the costs incurred after the site ceases to accept waste, but before the landfill is certified as closed by the applicable state regulatory agency. These costs generally include the costs required to cap the final cell of the landfill (if not included in cell closure), the costs required to dismantle certain structures for landfills and other landfill improvements, and regulation-mandated groundwater monitoring and leachate management. Post-closure costs involve the maintenance and monitoring of a landfill site that has been certified closed by the applicable regulatory agency. These costs generally include groundwater monitoring and leachate management. Regulatory post-closure periods are generally 30 years after landfill closure. Final closure and post-closure obligations are accrued on a units-of-consumption basis, such that the present value of the final closure and post-closure obligations are fully accrued at the date the landfill ceases accepting waste. Cell closure, final closure and post-closure costs (also referred to as "asset retirement obligations") are calculated by estimating the total obligation in current dollars, adjusted for future inflation estimates and discounted at the Company's credit-adjusted risk-free interest rate ( 5.37 % and 4.84 % during 2022 and 2021, respectively) . Non-Landfill Closure and Post-Closure Liabilities The balance of non-landfill closure and post-closure liabilities at December 31, 2022 and 2021 was $ 56.6 million and $ 45.7 million, respectively. Non-landfill closure and post-closure obligations arise when the Company commences non-landfill facility operations and include costs required to dismantle and decontaminate certain structures and other costs incurred during the closure process. Post-closure costs, if required, include associated maintenance and monitoring costs as required by the closure permit. Post-closure periods are performance-based and are not typically specified in terms of years in the closure permit, but generally range from 10 to 30 years or more. 59 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company records its non-landfill closure and post-closure liability by: (i) estimating the current cost of closing a non-landfill facility and the post-closure care of that facility, if required, based upon the closure plan that the Company is required to follow under its operating permit, or in the event the facility operates with a permit that does not contain a closure plan, based upon legally enforceable closure commitments made by the Company to various government agencies; (ii) estimates as to when future operations may cease; (iii) cost estimates of closing the non-landfill facility using the inflation rate to the time of closing; and (iv) discounting the future value back to the present using the credit-adjusted risk-free interest rate. The estimates for non-landfill closure and post-closure liabilities are inherently uncertain due to the possibility that permit and regulatory requirements will change in the future, impacting the estimation of total costs and the timing of the expenditures. Management reviews non-landfill closure and post-closure liabilities for changes to key assumptions that would impact the amount of the recorded liabilities. Changes that would prompt management to revise a liability estimate include changes in legal requirements that impact the Company's expected closure plan or scope of work, in the market price of a significant cost item, in the estimate as to when future operations at a location might cease or in the expected timing of the costs. Changes in estimates for non-landfill closure and post-closure events immediately impact the liability and the value of the corresponding asset. If a change is made to a fully-amortized asset, the adjustment is charged immediately to expense. When a change in estimate relates to an asset that has not been fully amortized, the adjustment to the asset is recognized in income prospectively as a component of amortization. Historically, changes to non-landfill closure and post-closure estimates have not been material. Remedial Liabilities The balance of remedial liabilities at December 31, 2022 and 2021 was $ 116.3 million and $ 111.9 million, respectively. Remedial liabilities, including Superfund liabilities, include the costs of removal or containment of contaminated material, treatment of potentially contaminated groundwater and maintenance and monitoring costs necessary to comply with regulatory requirements. Most of the Company's remedial liabilities relate to the active and inactive hazardous waste treatment and disposal facilities which the Company acquired and Superfund sites owned by third-parties for which the Company, or the prior owners of certain of the Company's facilities for which the Company may have certain indemnification obligations, have been identified as potentially responsible parties ("PRPs") or potential PRPs. The Company's estimate of remedial liabilities involves an analysis of such factors as: (i) the nature and extent of environmental contamination (if any); (ii) the terms of applicable permits and agreements with regulatory authorities as to cleanup procedures and whether modifications to such permits and agreements will likely need to be negotiated; (iii) the cost of performing anticipated cleanup activities based upon current technology; and (iv) in the case of Superfund and other sites where other parties will also be responsible for a portion of the cleanup costs, the likely allocation of such costs and the ability of such other parties to pay their share. The measurement of remedial liabilities is reviewed at least quarterly and changes in estimates are recognized in the consolidated statements of operations when identified. Where the Company concludes that it is probable that a liability has been incurred and an amount can be estimated, a liability is recognized. Remedial liabilities are inherently difficult to estimate. Estimating remedial liabilities requires that the existing environmental contamination be understood. There are risks that the actual quantities of contaminants differ from the results of the site investigation, and that contaminants exist that have not been previously identified. In addition, the amount of remedial liabilities recorded is dependent on the remedial method selected. There is a risk that funds will be expended on a remedial solution that is not successful, which could result in the Company incurring the incremental costs of an alternative solution. Such estimates, which are subject to change, are subsequently revised if and when additional or new information becomes available. Remedial liabilities are discounted when the timing of the payments is determinable and the amounts are estimable. In the case of remedial liabilities assumed in connection with acquisitions, acquired liabilities are recorded at fair value as of the dates of the acquisitions calculated by inflating costs in current dollars using an estimate of future inflation rates as of the respective acquisition dates until the expected time of payment, and then discounting the amount of the payments to their present value using a risk-free discount rate as of the acquisition dates. Discount rates used in the present value determination of the Company's remedial liabilities range from 1.37 % to 4.90 %. Self-Insurance Liabilities The Company self-insures a significant portion of expected losses related to workers' compensation, employee medical, comprehensive general liability and vehicle liability. Liabilities associated with these losses are recorded based on the Company's estimates of the ultimate cost to settle incurred claims. These recorded liabilities are estimated based on independent 60 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) actuarial estimates and judgments which consider the frequency and settlement amount of historical claims data and are discounted to present value using a risk-free interest rate. Revenue Recognition The Company recognizes revenue when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The majority of the Company’s revenues are for services, which are recognized based on time and materials incurred at contractually agreed-upon rates. Product revenues are recognized when the products are delivered and control transfers to the customer. The Company’s payment terms vary by the type of customers and the products or services offered. The periods between invoicing and when payments are due are not significant. Amounts billed to customers related to shipping and handling are classified as revenue, and the Company's shipping and handling costs are included in costs of revenues. In the course of operations, the Company collects sales tax and other excise taxes from its customers and recognizes a current liability, which is then relieved when the taxes are remitted to the appropriate government authorities. The Company excludes sales and other excise taxes that it collects from customers from its revenues. Foreign Currency The Company has international operations in Canada and administrative support services located in India. The functional currencies of foreign operations are the local currency and therefore assets and liabilities of those foreign operations are translated to U.S. Dollars at the exchange rate in effect at the balance sheet date and revenue and expenses at the average exchange rate for the period. Gains and losses from the translation of the consolidated financial statements of foreign subsidiaries into U.S. Dollars are included in stockholders' equity as a component of accumulated other comprehensive loss. Gains and losses from transactions not denominated in the functional currency of an entity are recognized in the consolidated statements of operations. Recorded balances that are denominated in a currency other than the functional currency are remeasured to the functional currency using the exchange rate at the balance sheet date and gains or losses are recorded in the consolidated statements of operations. Defined Contribution Plan The Company has defined contribution plans under which eligible employees may contribute up to the maximum amount as provided by law. The Company matches a portion of these employee contributions and contributed $ 25.3 million, $ 20.5 million and $ 18.6 million in 2022, 2021 and 2020 respectively. Advertising Expense Advertising costs are expensed as incurred. Advertising expense was $ 9.4 million in 2022, $ 6.0 million in 2021 and $ 9.0 million in 2020. Stock-Based Compensation Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period. In addition, the Company issues awards with performance targets established prior to or at the grant date. The expense for these awards is recognized over the requisite service period when management believes it is probable those performance targets will be achieved. The fair value of the Company's grants are based on the closing price of the Company's common stock on the respective dates of grant. Forfeitures are recognized as they occur. Stock-based compensation is recognized in selling, general and administrative expense. 61 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Interest Rate Derivatives The Company enters into interest rate derivative agreements as part of the overall strategy to hedge against fluctuations in variable interest rates. These interest rate derivatives swap a variable interest rate for a fixed interest rate and have been designated as cash flow hedges. The Company assesses the hedge’s effectiveness at the inception of the hedge and at regular intervals throughout the life of the derivative. To the extent that the interest rate swap is highly effective, changes in fair value are recorded in stockholders’ equity as a component of accumulated other comprehensive loss. Amounts are reclassified from accumulated other comprehensive loss into interest expense on the consolidated statement of operations in the same period or periods during which the hedged transactions affect earnings. Although it was determined that the interest rate swaps will be a highly effective hedge, any portion of the interest rate swaps subsequently determined to be ineffective will be recognized in earnings. Further, if it becomes probable that a forecasted transaction designated as the hedged item will not occur, any gain or loss deferred is recognized in interest expense at that time. The fair value of the interest rate swaps is calculated using discounted cash flow valuation methodologies based upon the one-month variable rate yield curves that are observable at commonly quoted intervals for the full term of the interest rate swaps and as such is considered a Level 2 measure according to the fair value hierarchy. The Company recognizes the fair value of the derivative instruments by counterparty as either a net asset, included in Other assets, or net liability, included in Accrued expenses and other current liabilities, on the consolidated balance sheets. Income Taxes Current income tax expense approximates cash to be paid or refunded for taxes for the applicable period. Deferred tax expense or benefit is the result of changes between deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based upon the temporary differences between the financial statement basis and tax basis of assets and liabilities as well as from net operating loss and tax credit carryforwards as measured by the enacted tax rates which will be in effect when these differences reverse. The effect of a change in tax rates on deferred tax assets and liabilities is generally recognized in income in the period that includes the enactment date. The Company evaluates the recoverability of future tax deductions and credits and a valuation allowance is established by tax jurisdiction when, based on an evaluation of both positive and negative objective verifiable evidence, it is more likely than not that some portion or all of deferred tax assets will not be realized. The Company recognizes and measures a tax benefit from uncertain tax positions when it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The Company recognizes a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate or future recognition of an unrecognized benefit. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. Liabilities for unrecognized tax benefits are included within other long-term liabilities in the consolidated balance sheets. The Company recognizes interest and penalties related to unrecognized tax benefits within the provision for income taxes line in the consolidated statements of operations. Accrued interest and penalties are included within the other long-term liabilities line in the consolidated balance sheets. Earnings per Share ("EPS") Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all potentially dilutive common shares that were outstanding during the period. Leases The Company’s leases predominately relate to real estate, equipment, such as vehicles and industrial equipment utilized in operations, and rail cars utilized in connection with the Company’s transportation needs. Contracts are reviewed at inception to determine if the arrangement is a lease and, if so, whether it is an operating or finance lease. For all of its leases, the Company has elected not to separate lease and nonlease components, such as common area maintenance. The Company generally enters into long-term real estate leases with three to ten-year terms and long-term non-real estate leases with two to eight-year terms. In the normal course of business, the Company also enters into short-term leases having terms of less than one year. These leases are generally equipment leases entered into for short periods of time (e.g. daily, weekly or monthly) to satisfy immediate and/or short-term operational needs of the business which can arise based upon the nature of particular services performed or seasonality factors. The Company has elected not to recognize right-of-use ("ROU") 62 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) assets and lease liabilities for these short-term leases. Operating and finance leases with terms exceeding one year are recognized as ROU assets and lease liabilities and measured based on the present value of the future lease payments over the lease term at commencement date. Certain of the Company's real estate leases contain escalating future lease payments. Escalating lease payments that are based upon explicit amounts contained in the lease or an index (e.g., consumer price index) are included in the Company's determination of future lease payments to determine the ROU asset and lease liability recognized at the commencement date. Any differences in the future lease payments from initial recognition are not anticipated to be material and will be recorded as variable lease cost in the period incurred. The variable lease cost will also include the Company’s portion of property tax, utilities and common area maintenance. A significant portion of the Company’s real estate lease agreements include renewal periods at the Company’s option. The Company includes these renewal periods in the lease term only when renewal is reasonably certain based upon facts and circumstances specific to the lease and known by the Company. Certain of the equipment and rail car leases transfer ownership upon the conclusion of the lease term and as such, are classified as finance leases. Leases containing purchase options are classified as finance leases only when it is reasonably certain that the Company will execute such options. The Company uses its incremental borrowing rate on collateralized debt based on the information available at the lease commencement date in determining the present value of future lease payments as the implicit rate is typically not readily determinable. For operating leases, lease cost is recognized on a straight-line basis over the lease term and is included in cost of revenues or selling, general and administrative expenses depending on the use of the asset. For finance leases, ROU assets are amortized on a straight-line basis and interest expense is recognized based on the incremental borrowing rate. Amortization and interest expense for finance leases are included in depreciation and amortization and interest expense, net of interest income, respectively. (3) REVENUES The Company generates revenues through the following operating segments: Environmental Services and Safety-Kleen Sustainability Solutions. The Company's Environmental Services operating segment generally has four sources of revenue and the Safety-Kleen Sustainability Solutions operating segment has two sources of revenue. The Company disaggregates third-party revenues by geographic location and source of revenue as management believes these categories depict how revenue and cash flows are affected by economic factors. The Company's significant sources of revenue include: Technical Services —Technical Services contribute to the revenues of the Environmental Services operating segment. Revenues for these services are generated from fees charged for waste material management and disposal services including onsite environmental management services, large remediation projects, collection and transportation, packaging, recycling, treatment and disposal of waste. Revenue is primarily generated by short-term projects, most of which are governed by master service agreements that are long-term in nature. These master service agreements are typically entered into with the Company's larger customers and outline the pricing and legal frameworks for such arrangements. Services are provided based on purchase orders or agreements with the customer and include prices based upon units of volume of waste, material and personnel costs as well as transportation and other fees. Collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred as a basis for measuring the satisfaction of the performance obligation. Revenues for treatment and disposal of waste are recognized upon completion of treatment, final disposition in a landfill or incinerator, or when the waste is shipped to a third-party for processing and disposal. The Company periodically enters into bundled arrangements for the collection and transportation and disposal of waste. For such arrangements, transportation and disposal are considered distinct performance obligations and the Company allocates revenue to each based on the relative standalone selling price (i.e., the estimated price that a customer would pay for the services on a standalone basis). Revenues and the related costs from waste that is not yet completely processed and disposed of are deferred. The deferred revenues and costs are recognized when the services are completed. The period between collection and transportation and the final processing and disposal ranges depending on the location of the customer, but generally is measured in days. Industrial Services and Other —Industrial Services contribute to the revenues of the Environmental Services operating segment. These revenues are primarily generated from industrial and specialty services provided to refineries, mines, upgraders, chemical plants, pulp and paper mills, manufacturing facilities, power generation facilities and other industrial customers throughout North America. Services include in-plant cleaning and maintenance services, plant outage and turnaround services, 63 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) specialty cleaning services including chemical cleaning, pigging and high and ultra-high pressure water cleaning, leak detection and repair, daylighting, production services and upstream energy services. Services are provided based on purchase orders or agreements with the customer and include prices based upon daily, hourly or job rates for equipment, materials and personnel. The Company recognizes revenue for these services over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Field and Emergency Response Services —Field and Emergency Response Services contribute to the revenues of the Environmental Services operating segment. Field Services revenues are generated from cleanup services at customer sites, including those managed by municipalities and utility providers, or other locations on a scheduled or emergency response basis. Services include confined space entry for tank cleaning, site decontamination, remediation, railcar cleaning, manhole/vault clean outs, product recovery and transfer and vacuum services. Additional services include filtration and water treatment services. Response services for environmental emergencies of any scale range from man-made disasters such as oil spills to natural disasters such as hurricanes. Emergency response services also include spill cleanup on land and water, as well as contagion disinfection, decontamination and disposal services. Field and emergency response services are provided based on purchase orders or agreements with customers and include prices generally based upon daily, hourly or job rates for equipment, materials and personnel. The Company recognizes revenue for these services over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The Company uses the input method to recognize revenue over time, based on time and materials incurred. The duration of such services can be over a number of hours, several days or even months for larger scale projects. Safety-Kleen Environmental Services —Safety-Kleen Environmental Services revenues contribute both to the Environmental Services operating segment and the Safety-Kleen Sustainability Solutions operating segment depending upon the nature of such revenues and operating responsibilities relative to executing the revenue contracts. Revenues from providing containerized waste handling and disposal services, parts washer services and vacuum services, referred to collectively as the Safety-Kleen branches' core service offerings, contribute to the revenues of the Environmental Services operating segment. In addition, sales of packaged blended oil products and other complementary product sales contribute to the revenues of the Environmental Services operating segment. Revenues generated from waste oil, anti-freeze and oil filter collection services, sales of bulk blended oil products and sales of bulk automotive fluids contribute to the Safety-Kleen Sustainability Solutions operating segment. Generally, the revenue from services is recognized over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. The duration of such services can be over a number of hours or several days. The Company uses the input method to recognize revenue over time, based on time and materials incurred. Product revenue is recognized upon the transfer of control whereby control transfers when the products are delivered to the customer. Containerized waste services consist of profiling, collecting, transporting and recycling or disposing of a wide variety of waste. Related collection and transportation revenues are recognized over time, as the customer receives and consumes the benefits of the services as they are being performed and the Company has a right to payment for performance completed to date. Parts washer services include customer use of the Company's parts washer equipment, cleaning and maintenance of the parts washer equipment and removal and replacement of used cleaning fluids. Parts washer services are considered a single performance obligation due to the highly integrated and interdependent nature of the arrangement. Revenue from parts washer services is recognized over the service interval as the customer receives the benefit of the services. Safety-Kleen Oil —Safety-Kleen Oil related sales contribute to the revenues of the Safety-Kleen Sustainability Solutions segment. These revenues are generated from sales of high-quality base and blended lubricating oils to third-party distributors, government agencies, fleets, railroads and industrial customers. The business also sells recycled fuel oil to asphalt plants, industrial plants and pulp and paper companies. The used oil is also processed into vacuum gas oil which can be further re-refined into lubricant base oils or sold directly into the marine diesel oil fuel market. Revenue for oil products is recognized at a point in time, upon the transfer of control. Control transfers when the products are delivered to the customer. 64 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables present the Company's third-party revenue disaggregated by source of revenue and geography (in thousands): For the year ended December 31, 2022 Environmental Services Safety-Kleen Sustainability Solutions Corporate Total Primary Geographical Markets United States $ 3,675,880 $ 899,780 $ 507 $ 4,576,167 Canada 469,093 121,345 — 590,438 Total third-party revenues $ 4,144,973 $ 1,021,125 $ 507 $ 5,166,605 Sources of Revenue Technical Services $ 1,495,264 $ — $ — $ 1,495,264 Industrial Services and Other 1,311,072 — 507 1,311,579 Field and Emergency Response Services 575,300 — — 575,300 Safety-Kleen Environmental Services 763,337 199,360 — 962,697 Safety-Kleen Oil — 821,765 — 821,765 Total third-party revenues $ 4,144,973 $ 1,021,125 $ 507 $ 5,166,605 For the year ended December 31, 2021 Environmental Services Safety-Kleen Sustainability Solutions Corporate Total Primary Geographical Markets United States $ 2,631,112 $ 693,542 $ 299 $ 3,324,953 Canada 394,795 85,818 — 480,613 Total third-party revenues $ 3,025,907 $ 779,360 $ 299 $ 3,805,566 Sources of Revenue Technical Services $ 1,209,624 $ — $ — $ 1,209,624 Industrial Services and Other 705,999 — 299 706,298 Field and Emergency Response Services 466,380 — — 466,380 Safety-Kleen Environmental Services 643,904 161,587 — 805,491 Safety-Kleen Oil — 617,773 — 617,773 Total third-party revenues $ 3,025,907 $ 779,360 $ 299 $ 3,805,566 65 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 2020 Environmental Services Safety-Kleen Sustainability Solutions Corporate Total Primary Geographical Markets United States $ 2,287,796 $ 452,435 $ ( 674 ) $ 2,739,557 Canada 349,845 53,731 964 404,540 Total third-party revenues $ 2,637,641 $ 506,166 $ 290 $ 3,144,097 Sources of Revenue Technical Services $ 1,062,714 $ — $ — $ 1,062,714 Industrial Services and Other 480,331 — 290 480,621 Field and Emergency Response Services 461,036 — — 461,036 Safety-Kleen Environmental Services 633,560 175,676 — 809,236 Safety-Kleen Oil — 330,490 — 330,490 Total third-party revenues $ 2,637,641 $ 506,166 $ 290 $ 3,144,097 Contract Balances (in thousands) December 31, 2022 December 31, 2021 Receivables $ 964,603 $ 792,734 Contract assets (unbilled receivables) 107,010 94,963 Contract liabilities (deferred revenue) 94,094 83,749 The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits or deferred revenue (contract liabilities) on the consolidated balance sheet. Generally, billing occurs subsequent to revenue recognition, as a right to payment is not just subject to passage of time, resulting in contract assets. Contract assets are generally classified as current. The Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. The contract liability balances at the beginning of each period presented were generally fully recognized in the subsequent three-month period. Variable Consideration The nature of the Company's contracts give rise to certain types of variable consideration, including in limited cases volume discounts. Accordingly, management establishes a revenue allowance to cover the estimated amounts of revenue that may need to be credited to customers' accounts in future periods. The Company estimates the amount of variable consideration to include in the estimated transaction price based on historical experience, anticipated performance and management's best judgment at the time and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. There have been no material changes in estimates of variable consideration in the periods presented. Contract Costs Contract costs include direct and incremental costs to obtain or fulfill a contract. Parts washer costs include costs of solvent, commissions paid relating to revenue generated from parts washer services, and transportation costs associated with transferring the product picked up from the services as it is returned to the Company’s facilities or a third-party site. Costs related to the treatment of waste include costs for waste receiving, drum movement and storage, waste consolidation and transportation between facilities. The Company’s contract costs that are subject to capitalization are comprised of costs associated with parts washer services and costs associated with the treatment and disposal of waste. As of December 31, 2022 and 2021, the Company's deferred contract costs totaled $ 29.7 million and $ 26.4 million, respectively. Deferred parts washer costs are recognized over the service interval as the customer receives the benefit of the services, and deferred costs related to treatment and disposal of waste are recognized when the corresponding waste is disposed. Deferred costs are included within total current assets in the 66 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Company’s consolidated balance sheets. The deferred contract cost balances at the beginning of each period presented were fully recognized in cost of revenue in the subsequent three-month period. (4) BUSINESS COMBINATIONS Proposed 2023 Acquisition On February 9, 2023, the Company signed a purchase agreement to acquire a privately-owned company for an all cash purchase price of approximately $ 100.0 million, subject to customary closing adjustments. The Company intends to fund this acquisition with available cash. Once acquired, the operations of the acquired company will expand the Environmental Services segment's industrial service operations in the southeastern region of the United States. The acquisition is expected to close in early 2023. 2022 Acquisitions On June 17, 2022, the Company acquired a privately-owned company for an all-cash purchase price of approximately $ 78.9 million, net of cash acquired. The operations of the newly acquired company expand the Safety-Kleen Sustainability Solutions segment's waste oil collection capabilities and re-refining business throughout the southeast region of the United States, including the addition of a re-refinery in Georgia. The preliminary allocation of the purchase price is provisional and was based on estimates of the fair value of assets acquired and liabilities assumed as of June 17, 2022. The Company continues to obtain information to complete the valuation of these balances and the associated income tax accounting. Measurement period adjustments will reflect new information obtained about facts and circumstances that existed as of the acquisition date. The following table summarizes the preliminary determination and recognition of assets acquired and liabilities assumed (in thousands): At Acquisition Date As Reported December 31, 2022 Accounts receivable $ 1,111 Inventories and supplies 5,816 Prepaid expenses and other current assets 144 Property, plant and equipment 19,605 Permits and other intangibles 23,500 Operating lease right-of-use assets 585 Other non-current assets 13 Current liabilities ( 3,271 ) Current portion of operating lease liabilities ( 186 ) Operating lease liabilities, less current portion ( 399 ) Other long-term liabilities ( 55 ) Total identifiable net assets 46,863 Goodwill 32,015 Total purchase price $ 78,878 Permits and other intangible assets acquired include supplier relationships, permits, customer relationships and trademarks/tradenames and are anticipated to have estimated useful lives of between five and 20 years with a weighted average useful life of approximately 18 years. The excess of the total purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible and intangible assets acquired, was recorded as goodwill. The goodwill recognized is 67 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) attributable to the expected operating synergies, assembled workforce and growth potential that the Company expects to realize from the acquisition. Goodwill generated from the acquisition is deductible for tax purposes. The operations included in the Company's financial statements for the period ended December 31, 2022 and pro forma revenue and earnings amounts on a combined basis as if this acquisition had been completed on January 1, 2021 are immaterial to the consolidated financial statements of the Company. On December 9, 2022, the Company acquired a privately-owned business for $ 12.4 million cash consideration, subject to the settlement of working capital. The acquired company expands the Safety-Kleen Sustainability Solutions segment's oil collection operations in the southeast United States. In connection with this acquisition, goodwill of $ 2.5 million was recognized. The results of operations for the acquired business were not material in 2022. HydroChemPSC On October 8, 2021, the Company completed its acquisition of LJ Energy Services Intermediate Holding Corp. and its subsidiaries (collectively, “HydroChemPSC”), a privately owned company, for an all-cash purchase price of approximately $ 1.23 billion. HydroChemPSC is a leading U.S. provider of industrial cleaning, specialty maintenance and utilities services. These operations enhance and have been fully integrated into the Company's Environmental Services segment. In the first quarter of 2022, the Company received $ 5.0 million after finalizing the acquisition date working capital balances, which decreased the overall purchase price. The Company finalized the purchase accounting for the acquisition of HydroChemPSC in the third quarter of 2022. The allocation of the purchase price was based on estimates of the fair value of assets acquired and liabilities assumed as of October 8, 2021. The following table summarizes the final determination and recognition of assets acquired and liabilities assumed (in thousands): At Acquisition Date As Reported December 31, 2021 Measurement Period Adjustments Final Allocation at Acquisition Date As Reported December 31, 2022 Accounts receivable, including unbilled receivables $ 131,924 $ ( 408 ) $ 131,516 Inventories and supplies 3,162 — 3,162 Prepaid expenses and other current assets 16,016 275 16,291 Property, plant and equipment 313,540 857 314,397 Other intangibles 289,000 — 289,000 Operating lease right-of-use assets 34,347 68 34,415 Other non-current assets 1,045 ( 83 ) 962 Current liabilities ( 115,704 ) ( 3,150 ) ( 118,854 ) Current portion of operating lease liabilities ( 11,659 ) 382 ( 11,277 ) Operating lease liabilities, less current portion ( 26,128 ) ( 216 ) ( 26,344 ) Deferred tax liabilities ( 85,908 ) 5,522 ( 80,386 ) Other long-term liabilities ( 2,685 ) ( 1,485 ) ( 4,170 ) Total identifiable net assets 546,950 1,762 548,712 Goodwill (i) 683,463 ( 6,762 ) 676,701 Total purchase price $ 1,230,413 $ ( 5,000 ) $ 1,225,413 _____________ (i) Goodwill represents the excess of the fair value of the net assets acquired over the purchase price. Goodwill of $ 676.7 million was assigned to the Environmental Sales and Service reporting unit and is attributable to the future economic benefits arising from the acquired operations, synergies and the acquired workforce of HydroChemPSC. None of the goodwill related to this acquisition will be deductible for tax purposes . 68 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Unaudited Pro Forma Financial Information The following table presents unaudited pro forma combined summary financial information for the years ended December 31, 2021 and December 31, 2020, respectively, and assumes the acquisition of HydroChemPSC occurred on January 1, 2020 (in thousands): 2021 2020 Pro forma combined revenues $ 4,380,724 $ 3,859,430 Pro forma combined net income 229,807 149,219 The pro forma results do not include any costs incurred directly attributable to the acquisition of HydroChemPSC. The pro forma results do reflect impacts resulting from the issuance of $ 1.0 billion senior secured term loans issued in connection with the acquisition assuming interest rates in effect at the time of the acquisition. This pro forma financial information is not necessarily indicative of the Company's consolidated operating results that would have been reported had the transactions been completed as described herein, nor is such information necessarily indicative of the Company's consolidated results for any future period. Interest expense used in calculating the pro forma net income in both periods did not contemplate the interest rate swap that the Company put in place in early 2022. See Note 12, "Financing Arrangements." Other 2021 Acquisition Activity On March 27, 2021, the Company acquired a privately-owned business for $ 22.8 million cash consideration. The acquired company increases the Safety-Kleen Sustainability Solutions segment's network within the south central United States. In connection with this acquisition, a goodwill amount of $ 16.3 million was recognized. The results of operations for this acquired business were not material in 2021. On June 29, 2021, the Company signed a definitive agreement with Vertex Energy, Inc. ("Vertex") to acquire certain assets related to Vertex's used motor oil collection and re-refinery business in an all-cash transaction for $ 140.0 million, subject to working capital and other adjustments. On January 25, 2022, Vertex and the Company mutually agreed to terminate the planned acquisition. In connection with the termination, in early 2022, Vertex paid Clean Harbors a breakup fee of $ 3.0 million pursuant to the agreement. 2020 Acquisition On April 17, 2020, the Company acquired a privately-owned business for $ 8.8 million cash consideration. The acquired company expands the Safety-Kleen Sustainability Solutions segment's oil re-refining operations to the northeast United States. In connection with this acquisition, goodwill of $ 1.4 million was recognized. The results of operations of this acquired business were not material in 2020. (5) DISPOSITION OF BUSINESS On June 30, 2022, the Company completed the sale of a line of business as part of its continuous focus on divesting certain non-core operations. The divested line of business was previously included within the Environmental Sales and Service reporting unit of the Environmental Services segment. The Company determined that the disposition did not constitute a strategic shift and that the impact on the Company's overall operations and financial results will not be material. Accordingly, the operations associated with the disposal are not reported in discontinued operations. The final purchase price for the line of business was $ 18.8 million, after settling working capital. The gain on sale of $ 8.9 million, after accounting for the assets sold, liabilities transferred upon sale and transaction costs, is included in gain on sale of business in the Company’s consolidated statement of operations for the year ended December 31, 2022. 69 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (6) INVENTORIES AND SUPPLIES Inventories and supplies consisted of the following (in thousands): December 31, 2022 December 31, 2021 Oil and oil related products $ 151,519 $ 101,965 Supplies 143,743 126,602 Solvent and solutions 11,994 8,099 Other 17,738 14,026 Total inventories and supplies $ 324,994 $ 250,692 The balance of oil and oil related products has increased due to higher volumes of base oil on hand at December 31, 2022 when compared with December 31, 2021 and overall price increases for the oil inventory and additives. Supplies inventories consist primarily of critical spare parts to support the Company's incinerator and re-refinery operations and other general supplies used in normal day-to-day operations. Other inventories consist primarily of parts washer components, cleaning fluids, absorbents and automotive fluids, such as windshield washer fluid and antifreeze. (7) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following (in thousands): December 31, 2022 December 31, 2021 Land $ 172,579 $ 165,010 Asset retirement costs (non-landfill) 22,001 19,105 Landfill assets 232,872 205,873 Buildings and improvements (1) 584,916 551,795 Camp equipment 116,976 127,680 Vehicles (2) 1,112,188 912,836 Equipment (3) 2,078,088 2,092,395 Furniture and fixtures 6,481 6,444 Construction in progress 140,328 60,447 4,466,429 4,141,585 Less - accumulated depreciation and amortization 2,486,127 2,278,410 Total property, plant and equipment, net $ 1,980,302 $ 1,863,175 ___________________________________ (1) Balances inclusive of gross ROU assets classified as finance leases of $ 8.0 million and $ 8.9 million, respectively. (2) Balances inclusive of gross ROU assets classified as finance leases of $ 106.7 million and $ 77.7 million, respectively. (3) Balances inclusive of gross ROU assets classified as finance leases of $ 9.2 million and $ 9.3 million, respectively. Depreciation expense, inclusive of landfill and finance lease amortization was $ 297.4 million, $ 263.4 million and $ 257.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company recorded $ 3.4 million of capitalized interest in 2022, mainly attributable to the construction of a new incinerator in Kimball, Nebraska. Capitalized interest in 2021 and 2020 was negligible. 70 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (8) GOODWILL AND OTHER INTANGIBLE ASSETS The changes in goodwill for the years ended December 31, 2022 and 2021 were as follows (in thousands): Environmental Services Safety-Kleen Sustainability Solutions Totals Balance at January 1, 2021 $ 401,918 $ 125,105 $ 527,023 Increase from current period acquisitions 683,463 16,349 699,812 Foreign currency translation 153 54 207 Balance at December 31, 2021 $ 1,085,534 $ 141,508 $ 1,227,042 Increase from current period acquisitions — 34,510 34,510 Measurement period adjustments from prior period acquisition ( 6,762 ) — ( 6,762 ) Decrease from disposition of business ( 4,412 ) — ( 4,412 ) Foreign currency translation ( 2,514 ) ( 986 ) ( 3,500 ) Balance at December 31, 2022 $ 1,071,846 $ 175,032 $ 1,246,878 The Company regularly assesses goodwill for impairment when it is more likely than not that events or changes in the business environment ("triggering events") would reduce the fair value of a reporting unit below its carrying value. The Company did not identify any triggering events in the years presented. Goodwill impairment is also tested annually. The Company conducted its annual impairment test of goodwill as of December 31, 2022 and determined that no adjustment to the carrying value of goodwill for any reporting unit was then necessary because the fair values of the reporting units exceeded their respective carrying values. The fair value of all reporting units was determined using an income approach based upon estimates of future discounted cash flows. The resulting estimates of fair value were validated through the consideration of other factors such as the fair value of comparable companies to the reporting units and a reconciliation of the sum of all estimated fair values of the reporting units to the Company’s overall market capitalization. In all cases, the estimated fair values of the reporting units significantly exceeded the respective carrying values. Significant judgments and unobservable inputs, categorized as Level 3 in the fair value hierarchy, are inherent in the impairment tests performed and include assumptions about the amount and timing of expected future cash flows, growth rates, and the determination of appropriate discount rates. Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. The Company believes that the assumptions used in its impairment tests are reasonable, but variations in any of the assumptions may result in different measurements of fair values. The impacts of any adverse business and market conditions which may impact the overall performance of the Company's reporting units will continue to be monitored. If the Company's reporting units do not achieve the financial performance that the Company expects, or if there is a significant prolonged change in demand for the Company's products and services, it is possible that goodwill impairment charges may result. Therefore, there can be no assurance that future events will not result in an impairment of goodwill. 71 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2022 and 2021, the Company's finite-lived and indefinite-lived intangible assets consisted of the following (in thousands): December 31, 2022 December 31, 2021 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Permits $ 188,373 $ 109,036 $ 79,337 $ 187,519 $ 102,408 $ 85,111 Customer and supplier relationships 583,709 229,368 354,341 576,474 214,776 361,698 Other intangible assets 89,388 24,818 64,570 94,271 19,359 74,912 Total amortizable permits and other intangible assets 861,470 363,222 498,248 858,264 336,543 521,721 Trademarks and trade names 122,534 — 122,534 123,191 — 123,191 Total permits and other intangible assets $ 984,004 $ 363,222 $ 620,782 $ 981,455 $ 336,543 $ 644,912 The Company regularly monitors and assesses whether events or changes in circumstances relative to the Company's business might indicate that future cash flows attributable to the Company's asset groups may not be sufficient to recover the current value of those assets. During the periods presented, there were no events or changes in circumstances which would indicate that the carrying values of the Company's asset groups would not be recoverable and thus no impairment charge was recorded related to the Company's long-lived assets . If expectations of future cash flows were to decrease in the future as a result of worse than expected or prolonged periods of depressed activity, future impairments may become evident. Amortization expense of permits, customer and supplier relationships and other intangible assets for the years ended December 31, 2022, 2021 and 2020 were $ 50.2 million, $ 34.7 million and $ 35.8 million, respectively. The Company wrote-off fully amortized intangible assets with a cost of $ 19.1 million during the year ended December 31, 2022. The expected amortization of the net carrying amount of finite-lived intangible assets at December 31, 2022 is as follows (in thousands): Years ending December 31, Expected Amortization 2023 $ 46,030 2024 41,814 2025 39,828 2026 37,943 2027 35,869 Thereafter 296,764 $ 498,248 (9) ACCRUED EXPENSES Accrued expenses consisted of the following (in thousands): December 31, 2022 December 31, 2021 Accrued insurance $ 92,909 $ 102,853 Accrued interest 20,033 19,785 Accrued compensation and benefits 123,226 133,604 Accrued income, real estate, sales and other taxes 61,442 29,954 Interest rate swap liability — 17,383 Accrued other 99,106 87,835 $ 396,716 $ 391,414 As of December 31, 2022 and 2021, accrued insurance included employee medical insurance costs of $ 16.4 million and $ 18.6 million, respectively, and accruals for losses under workers' compensation, comprehensive general liability and vehicle liability self-insurance programs of $ 74.9 million and $ 82.8 million, respectively. The increase in accrued income, real estate, sales and other taxes is due to the timing and amount of estimated payments of foreign income tax liabilities. The change in the 72 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) fair value of the interest rate swap liability from December 31, 2021 is mainly due to the passage of time and changes in future interest rate expectations. As of December 31, 2022, the interest rate swap derivatives are in an asset position and therefore, are included within Other Assets on the consolidated balance sheet. For additional information relating to the interest rate swaps, see Note 12, "Financing Arrangements." (10) CLOSURE AND POST-CLOSURE LIABILITIES The changes to closure and post-closure liabilities (also referred to as "asset retirement obligations") from January 1, 2021 through December 31, 2022 were as follows (in thousands): Landfill Retirement Liability Non-Landfill Retirement Liability Total Balance at January 1, 2021 $ 48,412 $ 39,514 $ 87,926 Liabilities assumed in acquisitions — 1,446 1,446 New asset retirement obligations 2,443 — 2,443 Accretion 3,655 3,702 7,357 Changes in estimates recorded to consolidated statement of operations 2,287 396 2,683 Changes in estimates recorded to consolidated balance sheet 2,297 1,415 3,712 Expenditures ( 5,818 ) ( 784 ) ( 6,602 ) Currency translation and other 149 ( 11 ) 138 Balance at December 31, 2021 53,425 45,678 99,103 Liabilities assumed in acquisitions — 55 55 Measurement period adjustments from prior period acquisitions — 1,148 1,148 New asset retirement obligations 3,743 — 3,743 Accretion 4,605 4,147 8,752 Changes in estimates recorded to consolidated statement of operations 1,063 5,712 6,775 Changes in estimates recorded to consolidated balance sheet 3,219 1,742 4,961 Expenditures ( 3,373 ) ( 1,778 ) ( 5,151 ) Currency translation and other ( 431 ) ( 154 ) ( 585 ) Balance at December 31, 2022 $ 62,251 $ 56,550 $ 118,801 The Company is in the process of closing two of its commercial landfill sites. The Altair landfill reached its permitted capacity in 2020 and the Westmorland landfill was closed due to the costs of obtaining and maintaining permits and operating the landfill. The changes in estimates recorded to the consolidated statement of operations includes $ 0.6 million and $ 2.3 million in 2022 and 2021, respectively, related to the closure of these two commercial landfills. The remainder of the change in estimate recorded to the consolidated statement of operations in 2022 was predominately the result of updated cost estimates for the planned closure of two non-landfill locations expected to commence in 2023. 73 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Anticipated payments (based on current estimated costs and anticipated timing of necessary regulatory approvals to commence work on closure and post-closure activities) for each of the next five years and thereafter are as follows (in thousands): Years ending December 31, 2023 $ 14,414 2024 14,733 2025 12,808 2026 8,369 2027 7,420 Thereafter 290,366 Undiscounted closure and post-closure liabilities 348,110 Less: Discount at credit-adjusted risk-free rate ( 153,062 ) Less: Undiscounted estimated closure and post-closure liabilities relating to airspace not yet consumed ( 76,247 ) Present value of closure and post-closure liabilities $ 118,801 (11) REMEDIAL LIABILITIES The changes to remedial liabilities from January 1, 2021 through December 31, 2022 were as follows (in thousands): Remedial Liabilities for Landfill Sites Remedial Liabilities for Inactive Sites Remedial Liabilities (Including Superfund) for Non-Landfill Operations Total Balance at January 1, 2021 $ 1,865 $ 63,060 $ 49,888 $ 114,813 Liabilities assumed in acquisitions — — 1,216 1,216 Accretion 90 2,614 1,684 4,388 Changes in estimates recorded to consolidated statement of operations ( 126 ) ( 178 ) 600 296 Expenditures ( 49 ) ( 4,889 ) ( 3,966 ) ( 8,904 ) Currency translation and other — ( 820 ) 884 64 Balance at December 31, 2021 1,780 59,787 50,306 111,873 Liabilities assumed in acquisition of real estate — — 8,092 8,092 Measurement period adjustments from prior period acquisition — — 338 338 Accretion 86 2,498 1,607 4,191 Changes in estimates recorded to consolidated statement of operations 8 877 612 1,497 Expenditures ( 50 ) ( 3,370 ) ( 5,375 ) ( 8,795 ) Currency translation and other — ( 43 ) ( 863 ) ( 906 ) Balance at December 31, 2022 $ 1,824 $ 59,749 $ 54,717 $ 116,290 In 2022, there were no significant charges or benefits resulting from changes in estimates for remedial liabilities. The $ 8.1 million liability assumed in acquisition relates to real estate that the Company acquired in 2022. In purchasing the property, the Company assumed a known associated remedial liability, which was contemplated in the purchase price. 74 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Anticipated payments at December 31, 2022 (based on current estimated costs and anticipated timing of necessary regulatory approvals to commence work on remedial activities) for each of the next five years and thereafter were as follows (in thousands): Years ending December 31, 2023 $ 10,793 2024 20,912 2025 12,065 2026 7,581 2027 6,390 Thereafter 76,416 Undiscounted remedial liabilities 134,157 Less: Discount at risk free rates ( 17,867 ) Total remedial liabilities $ 116,290 The following table presents the Company's estimated remedial liabilities and reasonably possible additional liabilities as of December 31, 2022 disaggregated by facility/site type (in thousands, except percentages): Type of Facility or Site Remedial Liabilities % of Total Reasonably Possible Additional Liabilities (1) Inactive facilities not used in active conduct of the Company's business, most of which were assumed through prior period acquisitions ( 25 facilities) $ 59,759 51.4 % $ 10,295 Facilities now used in active conduct of the Company's business ( 45 facilities) 47,951 41.2 11,189 Superfund sites ( 16 sites) 8,580 7.4 1,288 Total $ 116,290 100.0 % $ 22,772 ___________________________________ (1) Amounts represent the high end of the range of management's best estimate of the reasonably possible additional liabilities. The following table presents the Company's estimated remedial liabilities and reasonably possible additional liabilities as of December 31, 2022 disaggregated by facilities/sites which represent at least 5 % of the total and with all other facilities/ sites combined (in thousands, except percentages): Location Type of Facility or Site Remedial Liabilities (1) % of Total Reasonably Possible Additional Liabilities (2) Baton Rouge, LA Closed incinerator and landfill $ 26,604 22.9 % $ 4,547 Bridgeport, NJ Closed incinerator 18,089 15.6 3,364 Linden, NJ Operating solvent recycling center 14,479 12.5 3,352 Mercier, Quebec Idled incinerator 10,996 9.5 1,659 Various All other incinerators, landfills, wastewater treatment facilities and service centers ( 66 facilities) 37,542 32.1 8,562 Various Superfund sites (each representing less than 5 % of total liabilities) ( 16 sites) 8,580 7.4 1,288 Total $ 116,290 100.0 % $ 22,772 _________________________________ (1) $ 24.1 million of the $ 116.3 million remedial liabilities include estimates related to the legal and administrative proceedings discussed in Note 18, "Commitments and Contingencies." (2) Amounts represent the high end of the range of management's best estimate of the reasonably possible additional liabilities. 75 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Revisions to remediation reserve requirements may result in upward or downward adjustments to income from operations in any given period. The Company believes that its extensive experience in the environmental services business, as well as its involvement with a large number of sites, provides a reasonable basis for estimating its aggregate liability. It is possible, however, that future changes in available technology, regulatory or enforcement developments, the results of environmental studies or other factors could necessitate the recording of additional liabilities or the revision of currently recorded liabilities that could be material. Since the Company's satisfaction of the liabilities will occur over many years, the Company cannot reasonably predict the nature or extent of possible future events or the impact that those events, if any, might have on the current estimates of remedial liabilities. (12) FINANCING ARRANGEMENTS Long-term Debt The following table is a summary of the Company's long-term debt (in thousands): Current Portion of Long-Term Debt: December 31, 2022 December 31, 2021 Secured senior term loans $ 10,000 $ 17,535 Long-Term Debt: Secured senior term loans due June 30, 2024 ("2024 Term Loans") $ 613,975 $ 712,091 Secured senior term loans due October 8, 2028 ("2028 Term Loans") 980,000 990,000 Unsecured senior notes, at 4.875 %, due July 15, 2027 ("2027 Notes") 545,000 545,000 Unsecured senior notes, at 5.125 %, due July 15, 2029 ("2029 Notes") 300,000 300,000 Long-term debt, at par 2,438,975 2,547,091 Unamortized debt issuance costs and discount, net ( 24,147 ) ( 30,067 ) Long-term debt, at carrying value $ 2,414,828 $ 2,517,024 Secured Senior Term Loans. As of December 31, 2022, the Company had two series of secured senior term loans ("Term Loans") outstanding under Incremental Facility Amendment No. 2, dated October 8, 2021, to the Company's existing Credit Agreement, dated June 30, 2017 ("the Term Loan Agreement"). The 2028 Term Loans had an aggregate principal amount outstanding of $ 990.0 million as of December 31, 2022. Under the Term Loan Agreement, the 2028 Term Loans bear interest, at the Company’s election, at either of the following rates: (a) the sum of the Eurodollar Rate (as defined in the Term Loan Agreement) plus 2.00 %, or (b) the sum of the Base Rate (as defined in the Term Loan Agreement) plus 1.00 %, with the Eurodollar Rate being subject to a floor of 0.00 % and the Base Rate being subject to a floor of 1.00 %. The 2024 Term Loans had an aggregate principal amount outstanding of $ 614.0 million as of December 31, 2022. Under the Term Loan Agreement, the 2024 Term Loans bore interest, at the Company’s election, at either of the following rates: (a) the sum of the Eurodollar Rate (as defined in the Term Loan Agreement) plus 1.75 %, or (b) the sum of the Base Rate (as defined in the Term Loan Agreement) plus 1.00 %, with the Eurodollar Rate being subject to a floor of 0.00 % and the Based Rate being subject to a floor of 1.00 %. Interest on the Term Loans are paid monthly. The Term Loans are prepayable at any time without premium or penalty, other than customary breakage costs with respect to Eurodollar based loans. The Company’s obligations under the Term Loan Agreement with respect to both the 2024 Term Loans and the 2028 Term Loans are guaranteed by all of the Company’s domestic restricted subsidiaries and secured by liens on substantially all of the assets of the Company and the guarantors. On November 21, 2022, the Company repaid $ 100.0 million principal amount of the then outstanding 2024 Term Loans with available cash. In connection with this transaction, the Company recorded a loss on early extinguishment of debt of $ 0.4 million during the year ended December 31, 2022 related to the write-off of unamortized debt issuance costs for the settled debt. On January 24, 2023, the remaining $ 614.0 million principal amount of the 2024 Term Loans was repaid using net proceeds from the issuance of $ 500.0 million of unsecured senior notes due on February 1, 2031 as described below, a 76 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) $ 114.0 million loan under the Company's Revolving Credit Facility and available cash. In connection with the repayment, the Company will recognize a loss on early extinguishment of debt of approximately $ 2.4 million in 2023. Unsecured Senior Notes. On July 2, 2019, the Company completed a private placement of $ 545.0 million aggregate principal amount of 2027 Notes and $ 300.0 million aggregate principal amount of 2029 Notes. The 2027 Notes will mature on July 15, 2027, and the 2029 Notes will mature on July 15, 2029. Interest payments on the 2027 Notes and 2029 Notes are paid semiannually on January 15 and July 15. On January 24, 2023, the Company completed a private placement of $ 500.0 million aggregate principal amount of unsecured senior notes which mature on February 1, 2031 (the "2031 Notes" and, together with the 2027 and 2029 Notes, the "Notes"). The interest rate on the 2031 Notes is fixed at 6.375 % and is paid semiannually on February 1 and August 1 of each year commencing on August 1, 2023. The tables below depict the redemption prices (expressed as percentages of the principal amount) of the Notes if redeemed during the twelve-month period commencing on the dates below, plus accrued and unpaid interest, if any, to but not including the date of redemption. 2027 Notes Year Percentage July 15, 2022 102.438 % July 15, 2023 101.219 % July 15, 2024 and thereafter 100.000 % 2029 Notes Year Percentage July 15, 2024 102.563 % July 15, 2025 101.281 % July 15, 2026 and thereafter 100.000 % 2031 Notes Year Percentage February 1, 2026 103.188 % February 1, 2027 101.594 % February 1, 2028 and thereafter 100.000 % The Company may also redeem all or any portion of the 2029 Notes prior to July 15, 2024 or the 2031 Notes prior to February 1, 2026, at a redemption price equal to 100 % of the principal amount redeemed plus a make whole premium as of the date of redemption including accrued and unpaid interest, if any, up to but not including the date of redemption. Additionally, subject to certain limitations, prior to February 1, 2026, the Company may use net cash proceeds of one or more equity offerings to redeem up to 40 % in aggregate principal of the 2031 Notes at a redemption price equal to 106.375 % of the principal amount thereof plus accrued and unpaid interest thereon, if any, up to but not including the date of redemption. The Notes and the related indentures contain various customary non-financial covenants and are guaranteed by substantially all of the Company’s current and future domestic subsidiaries. The Notes are effectively subordinated to the Company's Term Loans, revolving credit facility and finance lease obligations to the extent of the value of the assets securing such secured indebtedness. The Notes are also effectively subordinated to all indebtedness and other liabilities of the Company's subsidiaries that are not guarantors of the Notes. As of December 31, 2022 and 2021, the estimated fair value of the Company’s outstanding long-term debt, including the current portion, was $ 2.4 billion and $ 2.6 billion, respectively. The Company’s estimates of the fair value of its long-term debt, including the current portion, are based on quoted market prices or other available market data which are considered Level 2 measures according to the fair value hierarchy. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotation, or alternative pricing sources with reasonable levels of price transparency for similar assets and liabilities. 77 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Revolving Credit Facility. On October 28, 2020, the Company and one of the Company's subsidiaries (the "Canadian Borrower") entered into an amended and restated credit agreement for the Company's revolving credit facility with Bank of America, N.A. (“BofA”), as agent for the lenders under the facility (the "Agent"). Under the amended and restated facility, the Company has the right to obtain revolving loans and letters of credit for a combined maximum of up to $ 350.0 million (with a sub-limit of $ 250.0 million for letters of credit) and the Canadian Borrower has the right to obtain revolving loans and letters of credit for a combined maximum of up to $ 50.0 million. Availability under the U.S. line is subject to a borrowing base primarily comprised of 85 % of the eligible accounts receivable of the Company and its U.S. subsidiaries plus 100 % of cash deposited in a controlled account with the Agent, and availability under the Canadian line is subject to a borrowing base primarily comprised of 85 % of the eligible accounts receivable of the Company’s Canadian subsidiaries plus 100 % of cash deposited in a controlled account with the Agent’s Canadian affiliate. Subject to certain conditions, the revolving credit facility will expire on October 28, 2025. Borrowings under the revolving credit facility bear interest at a rate of, at the Company’s option, either (i) LIBOR plus an applicable margin ranging from 1.50 % to 1.75 % per annum based primarily on the level of the Company’s average liquidity for the most recent 30 day period or (ii) BofA’s base rate plus an applicable margin ranging from 0.50 % to 0.75 % per annum based primarily on such average liquidity. There is also an unused line fee, calculated on the then unused portion of the lenders’ $ 400.0 million maximum commitments, ranging from 0.25 % to 0.375 % per annum of the unused commitment. For outstanding letters of credit, the Company pays to the lenders a fee equal to the then applicable LIBOR margin described above, and to the issuing banks a standard fronting fee and customary fees and charges in connection with all amendments, extensions, draws and other actions with respect to letters of credit. In the event that LIBOR ceases to be available during the term of the revolving credit facility, the amended and restated credit agreement provides procedures to determine a LIBOR successor rate. Letters of credit issued under the revolving credit facility are utilized primarily as security for the Company's insurance program that includes casualty and financial assurance. The Company’s obligations under the revolving credit facility (including revolving loans and reimbursement obligations for outstanding letters of credit) are guaranteed by substantially all of the Company’s U.S. subsidiaries and secured by a first lien on the Company’s and its U.S. subsidiaries’ accounts receivable. The Canadian Borrower’s obligations under the facility are guaranteed by substantially all of the Company’s Canadian subsidiaries and secured by a first lien on the accounts receivable of the Canadian subsidiaries. The revolving credit facility had no outstanding loan balances at December 31, 2022 and 2021 and had availability of $ 288.6 million and outstanding letters of credit of $ 111.4 million at December 31, 2022. As noted above, on January 24, 2023, the Company borrowed $ 114.0 million under the revolving credit facility. Proceeds from this borrowing were used toward the repayment of the 2024 Term Loans. Cash Flow Hedges Although the interest rates on the Term Loans are variable, as of December 31, 2022, the Company effectively fixed the interest rate on $ 350.0 million principal of the outstanding 2024 Term Loans by entering into interest rate swap agreements in 2018 with a notional amount of $ 350.0 million ("2018 Swaps"). Under the terms of the 2018 Swaps' agreements, the Company receives interest based on the one-month LIBOR index and pays interest at a weighted average rate of approximately 2.92 %, which together with the 1.75 % interest rate margin for Eurocurrency borrowings on the 2024 Term Loans, results in an effective annual interest rate of approximately 4.67 %. In January 2022, the Company entered into interest rate swap agreements ("2022 Swaps") with a notional amount of $ 600.0 million to effectively fix the interest rate on $ 600.0 million principal of the outstanding 2028 Term Loans. Under the terms of the 2022 Swaps' agreements, the Company will receive interest based upon the variable rates on the 2028 Term Loans and pay a fixed amount of interest. The fixed rate on these instruments is 0.931 % through June 30, 2023 which, together with the 2.00 % interest rate margin for Eurodollar borrowings on the 2028 Term Loans, results in an effective annual interest rate of approximately 2.931 %. The fixed rate on these instruments increases to 1.9645 % from July 1, 2023 through September 30, 2027 to both mirror the current 2028 Term Loans variable interest payments and the successor rate upon the eventual sunsetting of the LIBOR rate. The Company has designated both the 2018 Swaps and the 2022 Swaps (collectively referred to as the “Swaps”) as cash flow hedges. As of December 31, 2022 the Company recorded a derivative asset with a fair value of $ 60.6 million. As of December 31, 2021, the Company recorded a derivative liability of $ 17.4 million. No ineffectiveness has been recognized on the Swaps in 2022, 2021 or 2020. 78 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) On January 24, 2023, concurrently with the repayment of the 2024 Term Loans, the Company received a cash payment of $ 8.7 million from the counterparties to settle the 2018 Swaps. The Company also reclassified the amounts previously deferred in accumulated other comprehensive loss and recognized an $ 8.7 million gain in interest expense. (13) INCOME TAXES The domestic and foreign components of income before provision for income taxes were as follows (in thousands): For the years ended December 31, 2022 2021 2020 Domestic $ 406,206 $ 223,438 $ 168,117 Foreign 131,792 46,277 6,433 Total $ 537,998 $ 269,715 $ 174,550 The provision for income taxes consisted of the following (in thousands, except percentages): For the years ended December 31, 2022 2021 2020 Current: Federal $ 52,237 $ 42,480 $ 33,327 State 26,980 18,126 14,575 Foreign 29,488 4,380 1,559 108,705 64,986 49,461 Deferred Federal 32,199 2,275 ( 965 ) State ( 2,432 ) ( 4,777 ) ( 2,506 ) Foreign ( 12,218 ) 3,984 ( 6,277 ) 17,549 1,482 ( 9,748 ) Provision for income taxes $ 126,254 $ 66,468 $ 39,713 Effective tax rate 23.5 % 24.6 % 22.8 % The Company's effective income tax rate varied from the amount computed using the statutory federal income tax rate of 21% as follows (in thousands): For the years ended December 31, 2022 2021 2020 Tax expense at U.S. statutory rate $ 112,980 $ 56,640 $ 36,655 State income taxes, net of federal benefit 19,831 12,101 9,837 Foreign rate differential 6,196 1,922 1,256 Valuation allowance ( 18,769 ) ( 9,139 ) ( 11,339 ) Uncertain tax position interest and penalties ( 2,454 ) 263 ( 712 ) Tax credits expired 2,768 2,530 2,039 Non-deductible compensation 2,754 2,326 1,406 Other 2,948 ( 175 ) 571 Provision for income taxes $ 126,254 $ 66,468 $ 39,713 The valuation allowance benefits recognized in 2022 were the result of cumulative profitable earnings at certain Canadian entities with historic operating losses. The 2022 earnings were sufficient to utilize substantially all of the net operating losses, and as of December 31, 2022, the Company released any remaining valuation allowances associated with these entities, which were nominal. The valuation allowance benefits recognized in 2021 and 2020 were predominately related to taxable earnings in certain Canadian entities that benefited from amounts received under the Canada Emergency Wage Subsidiary. In addition, foreign tax credits that expired in the periods presented had full valuation allowances which were also written off, contributing to the 79 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) valuation allowance benefits in the table above. The foreign tax credit expirations and associated valuation allowance write-offs had no net impact to the provision for income taxes in any year. The components of the total net deferred tax assets and liabilities as of December 31, 2022 and 2021 were as follows (in thousands): 2022 2021 Deferred tax assets: Provision for doubtful accounts $ 11,544 $ 10,188 Closure, post-closure and remedial liabilities 31,837 28,206 Operating lease liabilities 42,255 42,218 Accrued expenses 19,311 20,455 Accrued compensation and benefits 20,171 24,504 Net operating loss carryforwards (1) 41,585 68,381 Tax credit carryforwards (2) 8,903 12,368 Interest rate swap liability — 5,215 Stock-based compensation 3,988 2,705 Other 7,487 5,635 Total deferred tax assets 187,081 219,875 Deferred tax liabilities: Property, plant and equipment ( 281,131 ) ( 273,883 ) Operating lease right-of-use assets ( 41,939 ) ( 41,260 ) Interest rate swap asset ( 17,587 ) — Permits and other intangible assets ( 132,681 ) ( 138,241 ) Prepaid expenses ( 12,088 ) ( 10,212 ) Total deferred tax liabilities ( 485,426 ) ( 463,596 ) Total net deferred tax liability before valuation allowance ( 298,345 ) ( 243,721 ) Less valuation allowance ( 42,509 ) ( 69,806 ) Net deferred tax liabilities $ ( 340,854 ) $ ( 313,527 ) ___________________________________ (1) As of December 31, 2022, the net operating loss carryforwards included (i) state net operating loss carryforwards of $ 231.4 million which will begin to expire in 2023, (ii) federal net operating loss carryforwards of $ 34.8 million which will begin to expire in 2024 and (iii) foreign net operating loss carryforwards of $ 85.6 million which will begin to expire in 2023. (2) As of December 31, 2022, the foreign tax credit carryforwards of $ 7.7 million will expire between 2023 and 2024. The Company previously recognized the U.S. federal income taxes related to the operations in Canada and has not accrued for any remaining undistributed foreign earnings. These amounts continue to be indefinitely reinvested. The amount of tax associated with those unrepatriated earnings is not expected to be material. 80 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A valuation allowance is required to be established when, based on an evaluation of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The components of the total valuation allowance as of December 31, 2022 and 2021 were as follows (in thousands): 2022 2021 Allowance related to: Foreign tax credits 7,666 11,047 Federal net operating losses 3,783 3,788 State net operating loss carryforwards 9,928 12,053 Foreign net operating loss carryforwards 15,488 26,697 Deferred tax assets of a Canadian subsidiary 5,339 10,701 Realized and unrealized capital losses 305 5,520 Total valuation allowance $ 42,509 $ 69,806 The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service for calendar years 2017 through 2021. The Company may be subject to examination by Canadian federal and provincial authorities for calendar years 2015 through 2021 and by state and local revenue authorities for calendar years 2016 through 2021. The Company has ongoing U.S., state and local jurisdictional audits, as well as Canadian federal and provincial audits, all of which the Company believes will not result in material liabilities. The Company has not identified any material uncertain positions in the periods presented. (14) EARNINGS PER SHARE The following are computations of basic and diluted earnings per share (in thousands, except for per share amounts): For the years ended December 31, 2022 2021 2020 Numerator for basic and diluted earnings per share: Net income $ 411,744 $ 203,247 $ 134,837 Denominator: Weighted basic shares outstanding 54,223 54,514 55,479 Dilutive effect of equity-based compensation awards 264 247 211 Weighted dilutive shares outstanding 54,487 54,761 55,690 Basic earnings per share $ 7.59 $ 3.73 $ 2.43 Diluted earnings per share $ 7.56 $ 3.71 $ 2.42 For the year ended December 31, 2022, all then outstanding performance stock awards and restricted stock awards were included in the calculation of diluted earnings per share except for 10,250 of restricted stock awards which were excluded as their inclusion would have had an antidilutive effect. For the years ended 2021 and 2020, all the outstanding performance stock awards and restricted stock awards were included in the calculation of diluted earnings per share except for 14,237 and 53,667 , respectively, of performance stock awards for which the performance criteria were not yet attained at the reporting dates and 67,981 and 8,878 , respectively, of restricted stock awards which were excluded as their inclusion would have had an antidilutive effect. (15) STOCKHOLDERS' EQUITY The Company's board of directors has authorized the repurchase of up to $ 600.0 million of the Company's common stock. The repurchase program authorizes the Company to purchase the Company's 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 have depended and will depend on a number of factors including share price, cash required for future business plans, trading volume and other conditions. The Company has no obligation to repurchase stock under this program and may suspend or terminate the repurchase program at any time. 81 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) During the years ended December 31, 2022, 2021 and 2020, the Company repurchased and retired a total of 0.5 million, 0.6 million and 1.2 million shares, respectively, of the Company's common stock for total costs of $ 50.2 million, $ 54.4 million and $ 74.8 million, respectively. As of December 31, 2022, an additional $ 105.3 million remained available to repurchase shares under this program. (16) ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in accumulated other comprehensive loss by component and related tax impacts for the years ended December 31, 2022, 2021 and 2020 were as follows (in thousands): Foreign Currency Translation Adjustments Unrealized Gain (Loss) on Available-For-Sale Securities Unrealized (Loss) Gain on Fair Value of Interest Rate Hedges Unrealized Loss on Unfunded Pension Liability Total Balance at January 1, 2020 $ ( 187,795 ) $ 143 $ ( 20,839 ) $ ( 1,560 ) $ ( 210,051 ) Other comprehensive income (loss) before reclassifications 10,212 ( 10 ) ( 20,970 ) ( 255 ) ( 11,023 ) Amounts reclassified out of accumulated other comprehensive loss — — 8,180 — 8,180 Tax benefit 1,349 2 — 66 1,417 Other comprehensive income (loss) 11,561 ( 8 ) ( 12,790 ) ( 189 ) ( 1,426 ) Balance at December 31, 2020 ( 176,234 ) 135 ( 33,629 ) ( 1,749 ) ( 211,477 ) Other comprehensive (loss) income before reclassifications ( 1,590 ) ( 361 ) 6,235 1,411 5,695 Amounts reclassified out of accumulated other comprehensive loss — — 10,011 — 10,011 Tax benefit (provision) — 76 — ( 317 ) ( 241 ) Other comprehensive (loss) income ( 1,590 ) ( 285 ) 16,246 1,094 15,465 Balance at December 31, 2021 ( 177,824 ) ( 150 ) ( 17,383 ) ( 655 ) ( 196,012 ) Other comprehensive (loss) income before reclassifications ( 31,515 ) ( 523 ) 78,711 415 47,088 Amounts reclassified out of accumulated other comprehensive loss — — ( 683 ) — ( 683 ) Tax benefit (provision) — 110 ( 17,587 ) ( 97 ) ( 17,574 ) Other comprehensive (loss) income ( 31,515 ) ( 413 ) 60,441 318 28,831 Balance at December 31, 2022 $ ( 209,339 ) $ ( 563 ) $ 43,058 $ ( 337 ) $ ( 167,181 ) The amounts realized in the consolidated statements of operations during the years ended December 31, 2022, 2021 and 2020 which were reclassified out of accumulated other comprehensive loss were as follows (in thousands): For the years ended December 31, Other Comprehensive Loss Component 2022 2021 2020 Location Unrealized (Loss) Gain on Fair Value of Interest Rate Hedges 683 ( 10,011 ) ( 8,180 ) Interest expense, net of interest income In the first quarter of 2023, the Company reclassified an unrealized gain of $ 8.7 million out of unrealized (loss) gain on fair value of interest rate hedges into interest expense in connection with the discontinuance of the 2018 Swap. For more information on this transaction, see Note 12, "Financing Arrangements." (17) STOCK-BASED COMPENSATION Stock-Based Compensation In 2020, the Company's shareholders approved the Clean Harbors, Inc. 2020 Stock Incentive Plan (the "2020 Plan"). The 2020 Plan provides for future awards of up to 2.5 million shares of the Company’s common stock (subject to certain anti-dilution adjustments) in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The 2020 Plan is administered by the Compensation Committee of the Company’s Board of Directors. The Company grants restricted stock awards and performance stock awards. The restricted stock awards generally vest over three to five years subject to continued employment. The performance stock awards vest depending on the satisfaction of certain performance conditions typically based on revenue, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted free cash 82 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) flow, return on invested capital and a measure of workplace safety. In addition, performance stock awards include continued service conditions subsequent to the attainment of any performance conditions. Total stock-based compensation expense for the years ended December 31, 2022, 2021 and 2020 was $ 26.8 million, $ 18.8 million and $ 18.5 million, respectively. The total income tax benefit recognized in the consolidated statements of operations from stock-based compensation expense was $ 5.0 million, $ 3.5 million and $ 4.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Restricted Stock Awards The following table summarizes information about restricted stock awards for the year ended December 31, 2022: Restricted Stock Number of Shares Weighted Average Grant-Date Fair Value Balance at January 1, 2022 452,197 $ 76.88 Granted 165,149 94.88 Vested ( 167,086 ) 74.37 Forfeited ( 23,118 ) 80.17 Balance at December 31, 2022 427,142 $ 84.64 As of December 31, 2022, there was $ 25.6 million of total unrecognized compensation cost arising from restricted stock awards. This cost is expected to be recognized over a weighted average period of 2.5 years. The total fair value of restricted stock vested during 2022, 2021 and 2020 was $ 16.4 million, $ 17.7 million and $ 13.3 million, respectively. Performance Stock Awards The following table summarizes information about performance stock awards for the year ended December 31, 2022: Performance Stock Number of Shares Weighted Average Grant-Date Fair Value Balance at January 1, 2022 169,757 $ 85.56 Granted 156,687 92.60 Vested ( 100,892 ) 83.51 Forfeited ( 11,873 ) 86.87 Balance at December 31, 2022 213,679 $ 91.62 As of December 31, 2022, there was $ 9.3 million of total unrecognized compensation cost arising from performance stock awards whereby the performance conditions either had been or were probable of being met. The total fair value of performance awards vested during 2022, 2021 and 2020 was $ 11.1 million, $ 15.0 million and $ 3.5 million, respectively. (18) COMMITMENTS AND CONTINGENCIES The Company and its subsidiaries are subject to legal proceedings and claims arising in the ordinary course of business. Actions filed against the Company arise from commercial and employment-related claims including alleged class actions related to sales practices and wage and hour claims. The plaintiffs in these actions may be seeking damages or injunctive relief or both. These actions are in various jurisdictions and stages of proceedings, and some are covered in part by insurance. In addition, the Company’s waste management services operations are regulated by federal, state, provincial and local laws enacted to regulate discharge of materials into the environment, remediation of contaminated soil and groundwater or otherwise protect the environment. This ongoing regulation results in the Company frequently becoming a party to legal or administrative proceedings involving all levels of government authorities and other interested parties. The issues involved in such proceedings generally relate to alleged violations of existing permits and licenses or alleged responsibility under federal or state Superfund laws to remediate contamination at properties owned either by the Company or by other parties (“third-party sites”) to which either the Company or the prior owners of certain of the Company’s facilities shipped waste. At December 31, 2022 and 2021, the Company had recorded reserves of $ 37.1 million and $ 36.1 million, respectively, for actual or probable liabilities related to the legal and administrative proceedings in which the Company was then involved, the principal of which are described below. As of December 31, 2022 and 2021, the $ 37.1 million and $ 36.1 million, respectively, 83 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) of reserves consisted of (i) $ 24.1 million in both periods, related to pending legal or administrative proceedings, including Superfund liabilities, which were included in remedial liabilities on the consolidated balance sheets, and (ii) $ 13.0 million and $ 12.0 million, respectively, primarily related to federal, state and provincial enforcement actions, which were included in accrued expenses on the consolidated balance sheets. In management's opinion, it is not reasonably possible that the potential liability beyond what has been recorded, if any, that may result from these actions, either individually or collectively, will have a material effect on the Company's financial position, results of operations or cash flows. The Company periodically adjusts the aggregate amount of these reserves when actual or probable liabilities are paid or otherwise discharged, new claims arise, or additional relevant information about existing or probable claims becomes available. Legal or Administrative Proceedings As of December 31, 2022, the principal legal and administrative proceedings in which the Company was involved, or which had been terminated during 2022, mainly relate to Safety-Kleen product liability cases and Superfund proceedings. Safety-Kleen Product Liability Cases: Safety-Kleen, Inc. ("Safety-Kleen"), which is a legal entity acquired by the Company in 2012, has been named as a defendant in certain product liability cases that are currently pending in various courts and jurisdictions throughout the United States. As of December 31, 2022, there were approximately 54 proceedings (excluding cases which have been settled but not formally dismissed) wherein persons claim personal injury resulting from the use of Safety-Kleen's parts cleaning equipment or cleaning products. These proceedings typically involve allegations that the solvent used in Safety-Kleen's parts cleaning equipment contains contaminants and/or that Safety-Kleen's recycling process does not effectively remove the contaminants that become entrained in the solvent during their use. In addition, certain claimants assert that Safety-Kleen failed to warn adequately the product user of potential risks, including a historic failure to warn that solvent contains trace amounts of toxic or hazardous substances such as benzene. The Company maintains insurance that it believes will provide coverage for these product liability claims (over amounts accrued for self-insured retentions and deductibles in certain limited cases), except for punitive damages to the extent not insurable under state law or excluded from insurance coverage. The Company also believes that these claims lack merit and has historically vigorously defended, and intends to continue to vigorously defend, itself and the safety of its products against all of these claims. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of December 31, 2022. From January 1, 2022 to December 31, 2022, 20 product liability claims were settled or dismissed. Due to the nature of these claims and the related insurance, the Company did not incur any expense as insurance provided coverage in full for all such claims. Safety-Kleen may be named in similar, additional lawsuits in the future, including claims for which insurance coverage may not be available. Superfund Proceedings: The Company has been notified that either the Company (which, since December 28, 2012, has included Safety-Kleen) or the prior owners of certain of the Company's facilities for which the Company may have certain indemnification obligations have been identified as PRPs or potential PRPs in connection with 131 sites which are subject to or are proposed to become subject to proceedings under federal or state Superfund laws. Of the 131 Superfund related sites, six involve facilities that are now owned or leased by the Company and 125 involve third-party sites to which either the Company or the prior owners of certain of the Company’s facilities shipped waste. Of the 125 third-party sites, 30 are now settled, 16 are currently requiring expenditures on remediation and 79 are not currently requiring expenditures on remediation. In connection with each site, the Company has estimated the extent, if any, to which it may be subject, either directly or as a result of any indemnification obligations, for cleanup and remediation costs, related legal and consulting costs associated with PRP investigations, settlements, and related legal and administrative proceedings. The amount of such actual and potential liability is inherently difficult to estimate because of, among other relevant factors, uncertainties as to the legal liability (if any) of the Company or the prior owners of certain of the Company's facilities to contribute a portion of the cleanup costs, the assumptions that must be made in calculating the estimated cost and timing of remediation, the identification of other PRPs and their respective capability and obligation to contribute to remediation efforts, and the existence and legal standing of indemnification agreements (if any) with prior owners, which may either benefit the Company or subject the Company to potential indemnification obligations. The Company believes its potential monetary liability could exceed $ 1.0 million at three of the 131 Superfund related sites. Of the 125 third-party sites at which the Company has been notified it is a PRP or potential PRP or may have indemnification obligations, the Company has an indemnification agreements at a total of 17 sites. These agreements indemnify the Company (which now includes Safety-Kleen) with respect to any liability at the 17 sites for waste disposed prior to the 84 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Company's (or Safety-Kleen's) acquisition of the former subsidiaries of Waste Management and McKesson which had shipped waste to those sites. Accordingly, the indemnifying parties are paying all costs of defending those subsidiaries in those 17 cases, including legal fees and settlement costs. However, there can be no guarantee that the Company's ultimate liabilities for those sites will not exceed the amount recorded or that indemnities applicable to any of these sites will be available to pay all or a portion of related costs. Except for those indemnification agreements discussed, the Company does not have an indemnity agreement with respect to any of the 125 third-party sites discussed above. Federal, State and Provincial Enforcement Actions From time to time, the Company pays fines or penalties in regulatory proceedings relating primarily to waste treatment, storage or disposal facilities. As of December 31, 2022, there was one proceeding for which the Company believes it is possible that the sanctions could equal or exceed $ 1.0 million. The Company believes that the fines or other penalties in this or any of the other regulatory proceedings will, individually or in the aggregate, not have a material effect on its financial condition, results of operations or cash flows. Self-Insurance Liabilities Under the Company's insurance programs, coverage is obtained for catastrophic exposures, as well as those risks required to be insured by law or contract. The Company's policy is to retain a significant portion of certain expected losses related to workers' compensation, employee medical, comprehensive general liability and vehicle liability. A portion of these self-insured liabilities are managed through its wholly-owned captive insurance subsidiary. Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregate liability for claims. The current deductible per participant per year for the employee medical insurance policy is $ 0.9 million. The current deductible per occurrence for workers' compensation is $ 1.0 million, general liability is $ 2.0 million and vehicle liability is $ 2.0 million. The retention per claim for the environmental impairment policy is $ 1.0 million. At December 31, 2022 and 2021, the Company had accrued $ 74.9 million and $ 82.8 million, respectively, for its self-insurance liabilities (exclusive of employee medical insurance) using a risk-free discount rate of 4.36 % and 0.97 %, respectively. Anticipated payments for contingencies related to workers' compensation, comprehensive general liability and vehicle liability related claims at December 31, 2022 for each of the next five years and thereafter were as follows (in thousands): Years ending December 31, 2023 $ 26,736 2024 16,317 2025 12,172 2026 8,170 2027 6,318 Thereafter 10,631 Undiscounted self-insurance liabilities 80,344 Less: Discount ( 5,452 ) Total self-insurance liabilities (included in accrued expenses) $ 74,892 (19) LEASES The Company’s lease portfolio is predominately operating leases for real estate, vehicles and industrial equipment utilized in operations and rail cars. The Company presents operating lease balances separately on the consolidated balance sheets. The Company's finance leases relate to equipment, rail cars and certain real estate. The following table presents the Company's finance lease balances and their classification on the consolidated balance sheets (in thousands): Finance Lease Balances (Classification) December 31, 2022 December 31, 2021 ROU assets (Property, plant and equipment, net) $ 96,207 $ 81,267 Current portion of lease liabilities (Accrued expenses) 12,767 10,893 Long-term portion of lease liabilities (Other long-term liabilities) 86,390 72,051 85 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company’s lease expense was as follows (in thousands): For the years ended December 31, 2022 2021 2020 Operating lease cost $ 59,041 $ 50,264 $ 53,194 Finance lease cost: Amortization of ROU assets 13,239 9,504 4,966 Interest on lease liabilities 3,011 2,544 1,523 Total finance lease cost 16,250 12,048 6,489 Short-term lease cost 158,736 102,913 70,692 Variable lease cost 4,353 3,546 3,691 Total lease cost $ 238,380 $ 168,771 $ 134,066 Other information related to leases was as follows: Weighted Average Remaining Lease Term (years) December 31, 2022 December 31, 2021 Operating leases 4.2 4.4 Finance leases 7.5 8.1 Weighted Average Discount Rate December 31, 2022 December 31, 2021 Operating leases 4.08 % 4.35 % Finance leases 3.53 % 3.65 % For the years ended December 31, Supplemental Cash Flow Related Disclosures (in thousands) 2022 2021 2020 Cash paid for amounts related to lease liabilities: Operating cash flows from operating leases $ 61,014 $ 50,963 $ 53,498 Operating cash flows from finance leases 3,011 2,544 1,523 Financing cash flows from finance leases 12,821 8,458 4,469 ROU assets obtained in exchange for operating lease liabilities 58,230 55,556 34,358 ROU assets obtained in exchange for finance lease liabilities 29,205 30,476 32,526 At December 31, 2022, the Company's future lease payments under non-cancelable leases that have lease terms in excess of one year were as follows (in thousands): Years ending December 31, December 31, 2022 Operating Leases Finance Leases 2023 $ 57,757 $ 17,085 2024 45,478 16,423 2025 32,739 15,748 2026 23,791 15,761 2027 14,635 15,748 Thereafter 11,564 33,950 Total future lease payments 185,964 114,715 Amount representing interest ( 17,173 ) ( 15,558 ) Total lease liabilities $ 168,791 $ 99,157 86 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At December 31, 2022, none of the Company's executed leases that had not yet commenced will create significant rights or obligations in the future and sublease transactions are not material. Additionally, the Company does not have any related party leases, and there were no restrictions or covenants imposed by its leases. (20) SEGMENT REPORTING Segment reporting is prepared on the same basis that the Company's chief executive officer, who is the Company's chief operating decision maker, manages the business, makes operating decisions and assesses performance. The Company is managed and reports as two operating segments; (i) the Environmental Services segment and (ii) the Safety-Kleen Sustainability Solutions segment. Third-party revenue is revenue billed to outside customers by a particular segment. Direct revenues is revenue allocated to the segment providing the product or service. Intersegment revenues represent the sharing of third-party revenues among the segments based on products and services provided by each segment as if the products and services were sold directly to the third-party. The intersegment revenues are shown net. The operations not managed through the Company’s operating segments described above are recorded as “Corporate Items.” The following tables reconcile third-party revenues to direct revenues for the years ended December 31, 2022, 2021 and 2020 (in thousands): For the year ended December 31, 2022 Environmental Services Safety-Kleen Sustainability Solutions Corporate Items Totals Third-party revenues $ 4,144,973 $ 1,021,125 $ 507 $ 5,166,605 Intersegment revenues (expense), net 26,733 ( 26,733 ) — — Direct revenues $ 4,171,706 $ 994,392 $ 507 $ 5,166,605 For the year ended December 31, 2021 Environmental Services Safety-Kleen Sustainability Solutions Corporate Items Totals Third-party revenues $ 3,025,907 $ 779,360 $ 299 $ 3,805,566 Intersegment revenues (expense), net 6,547 ( 6,547 ) — — Direct revenues $ 3,032,454 $ 772,813 $ 299 $ 3,805,566 For the year ended December 31, 2020 Environmental Services Safety-Kleen Sustainability Solutions Corporate Items Totals Third-party revenues $ 2,637,641 $ 506,166 $ 290 $ 3,144,097 Intersegment revenues (expense), net ( 1,740 ) 1,740 — — Direct revenues $ 2,635,901 $ 507,906 $ 290 $ 3,144,097 The primary financial measure by which the Company evaluates the performance of its segments is Adjusted EBITDA, which consists of net income plus accretion of environmental liabilities, stock-based compensation, depreciation and amortization, net interest expense, loss on early extinguishment of debt and provision for income taxes and excludes other gains, losses and non-cash charges not deemed representative of fundamental segment results and other expense (income), net. Transactions between the segments are accounted for at the Company’s best estimate based on similar transactions with outside customers. 87 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents Adjusted EBITDA information used by management by reported segment (in thousands): For the years ended December 31, 2022 2021 2020 Adjusted EBITDA: Environmental Services $ 953,053 $ 659,718 $ 665,918 Safety-Kleen Sustainability Solutions 306,327 227,354 83,214 Corporate Items ( 237,252 ) ( 210,466 ) ( 175,328 ) Total 1,022,128 676,606 573,804 Reconciliation to Consolidated Statements of Operations: Accretion of environmental liabilities 12,943 11,745 11,051 Stock-based compensation 26,844 18,839 18,502 Depreciation and amortization 347,594 298,135 292,915 Income from operations 634,747 347,887 251,336 Other (income) expense, net ( 2,472 ) 515 290 Loss on early extinguishment of debt 422 — — (Gain) loss on sale of businesses ( 8,864 ) — 3,376 Interest expense, net of interest income 107,663 77,657 73,120 Income from operations before provision for income taxes $ 537,998 $ 269,715 $ 174,550 The following table presents assets by reported segment and in the aggregate (in thousands): December 31, 2022 December 31, 2021 Property, plant and equipment, net Environmental Services $ 1,467,641 $ 1,374,913 Safety-Kleen Sustainability Solutions 398,660 373,721 Corporate Items 114,001 114,541 Total property, plant and equipment, net $ 1,980,302 $ 1,863,175 Goodwill and Permits and other intangibles, net Environmental Services Goodwill $ 1,071,846 $ 1,085,534 Permits and other intangibles, net 462,050 498,739 Total Environmental Services 1,533,896 1,584,273 Safety-Kleen Sustainability Solutions Goodwill $ 175,032 $ 141,508 Permits and other intangibles, net 158,732 146,173 Total Safety-Kleen Sustainability Solutions 333,764 287,681 Total $ 1,867,660 $ 1,871,954 88 Table of Contents CLEAN HARBORS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Geographic Information As of December 31, 2022 and 2021, the Company had property, plant and equipment, net of depreciation and amortization and permits and other intangible assets, net of amortization in the following geographic locations (in thousands): December 31, 2022 December 31, 2021 Total % of Total Total % of Total Property, plant and equipment, net United States $ 1,765,291 89.1 % $ 1,610,402 86.4 % Canada and other foreign 215,011 10.9 252,773 13.6 Total property, plant and equipment, net $ 1,980,302 100.0 % $ 1,863,175 100.0 % Permits and other intangibles, net United States $ 585,887 94.4 % $ 604,076 93.7 % Canada and other foreign 34,895 5.6 40,836 6.3 Total permits and other intangibles, net $ 620,782 100.0 % $ 644,912 100.0 % The following table presents the total assets by geographical area (in thousands): December 31, 2022 December 31, 2021 United States $ 5,595,255 $ 5,077,585 Canada and other foreign 534,452 576,114 Total $ 6,129,707 $ 5,653,699 89 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.