CLEAN HARBORS INC (CLH) FY 2024 MD&A

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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-K, including information with respect to our plans, strategies, objectives, expectations and intentions for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Form 10-K, our actual results could differ materially from the results described in or implied by these forward-looking statements. Please also see the section titled “Disclosure Regarding Forward-Looking Statements.”

Overview

We are North America’s leading provider of environmental and industrial services supporting our customers in finding environmentally responsible solutions to further their sustainability goals in today's world. Everywhere industry meets the environment, we strive to provide eco-friendly services and products that protect and restore North America’s natural environment. We believe we operate, in the aggregate, the largest number of hazardous waste incinerators, landfills and treatment, storage and disposal facilities (“TSDFs”) in North America. We serve over 350,000 customers, including the majority of Fortune 500 companies, across various markets including chemical and manufacturing, as well as numerous government agencies. These customers rely on us to safely deliver a broad range of services including but not limited to end-to-end hazardous waste management, emergency response, industrial cleaning and maintenance and recycling services. We are also a leading provider of parts cleaning and related environmental services to general manufacturing, automotive and commercial customers in North America and largest re-refiner and recycler of used oil in North America.

Performance of our segments is evaluated on several factors of which the primary financial measure is Adjusted EBITDA, as reconciled to our net income and described more fully below. The following is a discussion of how management evaluates its segments in regards to other factors including key performance indicators that management uses to assess the segments’ results, as well as certain macroeconomic trends and influences that impact each reportable segment:

•Environmental Services - The Environmental Services segment results are driven by the customer demand for our wide variety of services, the volume of waste managed and project work requiring responsible waste handling and disposal. Environmental Services results are also impacted by the demand for planned and unplanned industrial related cleaning and maintenance services at customer sites, environmental cleanup services on a scheduled or emergency basis, including response to large scale events such as major chemical spills, natural disasters, or other instances where immediate and specialized services are required. The Environmental Services segment results also include the Safety-Kleen branches’ core environmental service offerings of containerized waste disposal, parts washer and vacuum services. These results are driven by the volumes of waste collected from these customers, the overall number of parts washers placed at customer sites and the demand for and frequency of other offered services. The results and integration of the acquired operations of HEPACO Blocker, Inc. and its subsidiaries (collectively, “HEPACO”), which we acquired in March, 2024, also impact the overall segment results as we integrated this business into our Field Services operations. In managing the business and evaluating performance, management tracks the volumes and mix of waste handled and disposed of or recycled, generally through our incinerators, TSDFs and landfills, the utilization rates of our incinerators, equipment and workforce, including billable hours, and the number of parts washer services performed, and pricing realized by our business and peer companies as well as other key metrics. Levels of activity and ultimate performance associated with this segment can be impacted by several factors including overall North American GDP, U.S. industrial production, economic conditions in the general manufacturing, chemical and automotive markets including efforts and economic incentives to increase domestic operations, available capacity at waste disposal outlets, demand for industrial cleaning and related industrial services, weather conditions, efficiency of our operations, technology, changing regulations, competition, market pricing of our services, costs incurred to deliver our services and the management of our related operating costs.

•Safety-Kleen Sustainability Solutions - Safety-Kleen Sustainability Solutions (“SKSS”) segment results are impacted by our customers’ demand for high-quality, environmentally responsible recycled oil products and their demand for our related service and product offerings. SKSS offers high quality recycled base and blended oil products and other automotive and industrial lubricants to end users including fleet customers, distributors, manufacturers of oil products and industrial plants. Segment results are impacted by market pricing, overall demand and the mix of our oil products sales. Segment results are also predicated on the demand for other SKSS product and service offerings including collection services for used oil, used oil filters and other automotive fluids. The used oil collected is used as feedstock in our oil re-refining to produce our base and blended oil products and other hydraulic oils, lubricants and recycled fuel oil or are integrated into the Clean Harbors’ recycling and

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disposal network. The results and integration of the acquired operations of Noble Oil Services, Inc. and its subsidiaries (collectively “Noble”) also impact the overall segment results. In operating the business and evaluating performance, management tracks the volumes and relative percentages of base and blended oil sales along with various pricing metrics associated with the commodity driven margin between product pricing and the overall costs associated with the collection of used oil. Levels of activity and ultimate performance associated with this segment can be impacted by economic conditions in the manufacturing and automotive services markets, efficiency of our operations, technology, weather conditions, changing regulations, competition and the management of our related operating costs. Overall product pricing and costs incurred in connection with the collection of used oil and other raw materials associated with the segment’s oil related products can also be volatile and can be impacted by global events and their relative impact on commodity products and pricing. The overall market price of oil and regulations that change the possible usage of used oil or burning of used oil as a fuel, impact the premium the segment can charge for used oil collections.

Highlights

Total direct revenues for 2024 increased 8.9% or $480.8 million to $5,890.0 million, compared with $5,409.2 million in 2023. Our Environmental Services segment direct revenues increased $493.3 million or 10.9% in 2024 compared with 2023 driven by growth in Field and Emergency Response Services, including the contributions from the acquisition of HEPACO, as well as growth in our Technical Services and Safety-Kleen branch core service offerings. Direct revenues recorded by our SKSS segment decreased $12.5 million in 2024 compared to 2023 primarily due to lower market-based pricing on our base and blended oil product sales as well as reduced volumes of these products sold. Contributions from the acquisition of Noble partially offset these decreases. Foreign currency translation of our Canadian operations negatively impacted our consolidated direct revenues by $9.0 million in 2024 as compared to 2023.

Income from operations in 2024 was $670.2 million as compared with $612.4 million in 2023, an increase of 9.4%. We reported net income in 2024 and 2023 of $402.3 million and $377.9 million, respectively. Adjusted EBITDA, which is the primary financial measure by which we evaluate our operations, was $1,116.9 million in 2024 and $1,012.6 million in 2023, an increase of over 10%, driven by the results of our Environmental Services segment. Additional information regarding Adjusted EBITDA, which is a non-GAAP measure, including a reconciliation of net income to Adjusted EBITDA, appears below under “Adjusted EBITDA.”

Net cash from operating activities for 2024 was $777.8 million, an increase of $43.2 million from 2023. Adjusted free cash flow, which management uses to measure our financial strength and ability to generate cash, was $357.9 million in 2024, which represented a $32.7 million increase over 2023. This increase was due to incremental net cash generated by operating activities, partially offset by higher spend on property plant and equipment, net of proceeds from the sale and disposal of fixed assets. Additional information regarding adjusted free cash flow, which is a non-GAAP measure, including a reconciliation of net cash from operating activities to adjusted free cash flow, appears below under “Adjusted Free Cash Flow.”

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Segment Performance

The primary financial measure by which we evaluate the performance of our segments is Adjusted EBITDA. The following table sets forth certain financial information associated with our results of operations for the years ended December 31, 2024, 2023 and 2022 (in thousands, except percentages):

___________________________________

N/M = not meaningful

(1)Direct revenue is revenue allocated to the segment performing the provided service.

(2)Cost of revenues is shown exclusive of (i) accretion of environmental liabilities and (ii) depreciation and amortization which are presented separately on the consolidated statements of operations. Additionally, in 2024, cost of revenue is shown exclusive of $4.3 million of Kimball startup costs which are presented in Cost of revenue on the Company’s Consolidated Statements of Operations but are not included in the Company’s measurement of Adjusted EBITDA. See Adjusted EBITDA section below for a reconciliation of net income to Adjusted EBITDA.

(3)Selling, general and administrative expenses is shown exclusive of stock-based compensation which is presented in Selling, general and administrative expenses on the Company’s Consolidated Statements of Operations but is not included in the Company’s measurement of Adjusted EBITDA. See Adjusted EBITDA section below for a reconciliation of net income to Adjusted EBITDA.

(4)Calculated as a percentage of individual segment direct revenue.

(5)Calculated as a percentage of total Company revenue.

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Direct Revenues

There are many factors which can impact our revenues including, but not limited to: overall levels of industrial activity and economic growth in North America, changes in the regulatory environment including those related to per- and polyfluoroalkyl substances (“PFAS”), impacts of acquisitions and divestitures, competitive industry pricing, overall market incineration capacity including the closure of captive incinerators, the level of emergency response services, government infrastructure investment, reshoring industrial production and manufacturing, existence or non-existence of large scale environmental waste and remediation projects, weather related events, the number of parts washers placed at customer sites, miles driven and related lubricant demand, base and blended oil pricing, market supply for base oil products, market changes relative to the collection of used oil, our ability to manage the spread between oil product prices, and prices for the collection of used oil and foreign currency translation. In addition, customer efforts to minimize hazardous waste and changes in regulation can impact our revenues.

Environmental Services

Environmental Services direct revenues for the year ended December 31, 2024 increased $493.3 million from the comparable period in 2023 driven by incremental revenues from legacy operations combined with acquisitive growth. Field and emergency response service revenues increased $285.2 million from 2023 driven by approximately $220.4 million of incremental revenue from the acquisition of HEPACO as well as contributions from legacy operations. Technical services revenue increased $169.7 million with contributions across our portfolio of waste disposal services driven by favorable volumes of waste disposed, most notably in our incinerators and TSDFs, and favorable pricing. Utilization at our incinerators for 2024 was 88% as compared to 84% in the prior year. Revenue from our Safety-Kleen branches' core service offerings increased $76.9 million as both pricing and demand increased for our containerized waste, vacuum and parts washer services. Revenue from our industrial services operations declined $41.4 million due to lower turnaround activity and related high-value services compared to 2023. The Canadian operations of the Environmental Services segment were negatively impacted by $7.4 million due to foreign currency translation.

Environmental Services direct revenues for the year ended December 31, 2023 increased $339.7 million from the comparable period in 2022 due to growth across our service offerings. Revenue from our Safety-Kleen branches' core service offerings increased $113.9 million as both demand and pricing increased for our containerized waste, parts washer and vacuum services. Revenue from our industrial services operations grew $107.9 million due to contributions from the acquisition of Thompson Industrial on March 31, 2023 coupled with growth of the legacy industrial service offerings. Technical services revenue increased $68.6 million with contributions across our portfolio of waste disposal services more than offsetting slightly lower utilization at our incinerators. Landfill volumes and pricing both increased in 2023 and pricing for our incineration benefitted 2023 as well. Utilization at our incinerators for 2023 was 84% as compared to 86% in the prior year due to unplanned outages for required maintenance and significant weather events earlier in 2023. Field and emergency response service revenues increased $34.6 million from 2022. The Canadian operations of the Environmental Services segment were negatively impacted by $18.5 million due to foreign currency translation.

Safety-Kleen Sustainability Solutions

SKSS direct revenues for the year ended December 31, 2024 decreased $12.5 million from the comparable period in 2023 largely due to a reduction in revenues from base oil and blended oil sales of $33.5 million and $17.8 million, respectively, driven by lower pricing and to a lesser extent, lower volumes sold. Revenues from contract packaging services decreased $11.1 million and revenues generated from the sale of other products decreased $5.3 million when compared with the prior year. Revenues from the sale of vacuum gas oil and specialty refinery products increased $46.8 million as the revenues generated from the Noble operations, acquired in March 2024, more than offset decreases in these product sales from the legacy business. Overall, the operations of Noble added approximately $70 million of direct revenues to the SKSS segment in 2024, the majority coming from the sale of vacuum gas oil and specialty refinery products. Revenues from the collection of used oil also increased $5.7 million. The Canadian operations of the SKSS segment were negatively impacted by $1.6 million in 2024 due to foreign currency translation.

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SKSS direct revenues for the year ended December 31, 2023 decreased $97.1 million from the comparable period in 2022. Base oil sales revenues decreased $97.6 million due to lower pricing despite an 8% increase in the volume sold during 2023. Revenues from contract packaging also decreased $18.0 million and revenues from recycled fuel oil and refinery byproducts decreased $12.2 million. Blended oil sales revenues increased $19.5 million, a 23% increase in gallons sold, which offset the lower pricing of these products. Revenues from the collection of used oil increased $14.1 million driven by higher pricing for these services. The Canadian operations of the SKSS segment were negatively impacted by $4.8 million in 2023 due to foreign currency translation.

Cost of Revenues

We believe that management of operating costs is vital to our ability to remain price competitive. We continue to experience inflationary pressures across several cost categories, but most notably related to transportation, energy related costs and internal and external labor costs. We aim to manage these increases through constant cost monitoring and a focus on cost saving areas, including lowering employee turnover, as well as our overall customer pricing strategies designed to offset the negative inflationary impacts on our margins.

We continue to upgrade the quality and efficiency of our services through the development of new technology and continued modifications and expansion at our facilities while also leveraging certain fixed costs of our operating infrastructure. We invest in new business opportunities and aggressively implement strategic sourcing and logistics solutions, while also continuing to optimize our management and operating structure in an effort to manage our operating margins.

Environmental Services

Environmental Services cost of revenues for the year ended December 31, 2024 increased $303.0 million from the comparable period in 2023, while improving as a percentage of revenues. Overall, labor and benefit related costs increased $170.3 million, equipment and supply costs increased $95.2 million and external transportation, vehicle, and fuel costs increased $24.6 million. These cost increases were generally in line with the revenue growth in the business and the addition of the acquired operations in 2024. However better leverage of our costs and increases in revenues further improved our cost efficiency as a percentage of revenues.

Environmental Services cost of revenues for the year ended December 31, 2023 increased $160.1 million from the comparable period in 2022, but as a percentage of revenues, these costs improved 1.7%. Overall, labor and benefit related costs increased $126.1 million, equipment and supply costs increased $23.4 million and external transportation, vehicle and fuel related costs increased $6.8 million. These cost increases were generally commensurate with the revenue growth in the business, however better leverage of our costs drove the cost improvement as a percentage of revenues.

Safety-Kleen Sustainability Solutions

SKSS cost of revenues for the year ended December 31, 2024 increased $12.9 million from 2023 and as a percentage of revenues, these costs increased 2.5%. The cost increase is due to additional expenses from the Noble operations, which were partially offset by reduced costs resulting from the lower revenue volumes noted above. Total cost of revenues as a percentage of direct revenues increased primarily due to the market related pricing decreases discussed in the revenue section, higher cost per gallon of base oil products sold and the overall mix of products and services sold during 2024 as compared to the prior year.

SKSS cost of revenues for the year ended December 31, 2023 increased $31.0 million from the comparable period in 2022 and as a percentage of revenues, these costs increased 10.1%, mainly driven by the reduced revenue discussed above. Overall, external transportation, rail, vehicle and fuel costs increased $23.5 million, labor and benefit related costs increased $11.8 million and equipment and supply costs increased $5.5 million. Cost of materials, including oil additives and other raw materials decreased by $16.2 million mainly driven by a lower cost of obtaining used oil through our oil collection services. The remaining cost spread across various cost categories.

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Selling, General and Administrative Expenses

We aim to manage our selling, general and administrative ("SG&A") expenses in line with the overall performance of our segments and corresponding revenue levels. This is achieved through enhanced technology, process improvements and strategic expense management. Expanding our support functions globally has led to both profitability and productivity improvements. We believe our ability to properly align these costs with business performance is reflective of our strong management of the businesses and further promotes our ability to remain competitive in the marketplace. The SG&A balances in this section exclude stock-based compensation expense which is presented in SG&A on the Company’s Consolidated Statement of Operations but is not included in the Company’s measurement of Adjusted EBITDA. For a discussion on significant changes in consolidated stock-based compensation expense, please refer to the separate section below.

Environmental Services

Environmental Services SG&A expenses for the year ended December 31, 2024 increased $24.5 million from the comparable period in 2023, and slightly improved as a percentage of revenues by maintaining leverage of our SG&A base in the midst of the revenue growth discussed above. Overall, labor and benefit related costs increased $13.2 million primarily driven by additional costs from the HEPACO operations. The remaining increases were spread across various cost categories and were driven by overall growth in the segment results.

Environmental Services SG&A expenses for the year ended December 31, 2023 increased $31.1 million from the comparable period in 2022, but remained relatively consistent as a percentage of revenues by maintaining leverage of our SG&A base in the midst of the revenue growth discussed above. Overall, labor and benefit related costs, including travel, increased $32.0 million primarily driven by incremental headcount, including the acquisitions occurring during the periods, and higher incentive compensation.

Safety-Kleen Sustainability Solutions

SKSS SG&A expenses for the year ended December 31, 2024 remained relatively consistent with the comparable period in 2023 both in dollar amount and as a percentage of revenues.

SKSS SG&A expenses for the year ended December 31, 2023 increased $5.3 million from the comparable period in 2022 and as a percentage of revenues these costs increased mainly due to the revenue reductions discussed above. Higher labor and benefit costs of $3.5 million and a $1.1 million increase in a remedial liability estimate in 2023 drove the overall cost increase. The higher labor and benefit costs were primarily driven by the expanded sales team established in late 2022 which remained relatively consistent through 2023.

Corporate

We manage our Corporate SG&A expenses commensurate with the overall total Company performance and direct revenue levels. As a percentage of total Company revenues these costs remained relatively consistent in 2024, 2023 and 2022.

In total, Corporate SG&A expenses increased by $36.2 million in 2024; however, as noted above, these costs remained relatively consistent as a percentage of revenues. In general, the overall cost increase included a $29.4 million increase in labor and benefit related expenses predominately driven by incremental headcount from the operations acquired during 2024.

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Additionally, information technology costs increased by $5.1 million. Severance and integration related costs increased $4.9 million to a total of $14.3 million in 2024.

Corporate SG&A expenses increased by $13.5 million in 2023; however, as noted above, these costs remained relatively consistent as a percentage of revenues. In general, the overall cost increase was driven by higher labor and benefit related expenses, professional fees and cybersecurity/ information technology costs of $5.6 million, $3.9 million and $3.2 million, respectively.

Adjusted EBITDA

Management considers Adjusted EBITDA to be a measurement of performance which provides useful information to both management and investors. Adjusted EBITDA should not be considered an alternative to net income or other measurements under generally accepted accounting principles ("GAAP"). Adjusted EBITDA is not calculated identically by all companies, and therefore our measurements of Adjusted EBITDA, while defined consistently and in accordance with our existing credit agreement, may not be comparable to similarly titled measures reported by other companies.

We use Adjusted EBITDA to enhance our understanding of our operating performance, which represents our views concerning our performance in the ordinary, ongoing and customary course of our operations. We historically have found it helpful, and believe that investors have found it helpful, to consider an operating measure that excludes certain expenses relating to transactions not reflective of our core operations.

The information about our operating performance provided by Adjusted EBITDA is used by our management for a variety of purposes. We regularly communicate Adjusted EBITDA results to our lenders since our loan covenants are based upon levels of Adjusted EBITDA achieved and to our Board of Directors and we discuss with the Board our interpretation of such results. We also compare our Adjusted EBITDA performance against internal targets as a key factor in determining cash and equity bonus compensation for executives and other employees, largely because we believe that this measure is indicative of how the fundamental business is performing and being managed.

We also provide information relating to our Adjusted EBITDA so that analysts, investors and other interested persons have the same data that we use to assess our core operating performance. We believe that Adjusted EBITDA should be viewed only as a supplement to the GAAP financial information. We also believe, however, that providing this information in addition to, and together with, GAAP financial information provides a better understanding of our core operating performance and how management evaluates and measures our performance.

The following is a reconciliation of net income to Adjusted EBITDA for the following years (in thousands, except percentages):

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Stock-based Compensation

Stock-based compensation for the year ended December 31, 2024 increased $7.3 million from the comparable period in 2023. This increase was driven by recent stock price appreciation and higher expenses related to the achievement of performance metrics in 2024.

Stock-based compensation for the year ended December 31, 2023 decreased $6.1 million from the comparable period in 2022. This reduction was due to certain performance targets not being met in 2023, leading to lower share-based compensation costs compared with 2022.

Depreciation and Amortization

Depreciation and amortization for the year ended December 31, 2024 increased $35.2 million from the comparable period in 2023 due to incremental depreciation and amortization associated with the HEPACO and Noble acquisitions completed in March 2024 as well as incremental finance lease amortization.

Depreciation and amortization for the year ended December 31, 2023 increased $18.2 million from the comparable period in 2022 due to incremental depreciation and amortization associated with the Thompson Industrial assets acquired on March 31, 2023 and increased finance lease and landfill amortization in the period.

Other (Expense) Income, net

For the year ended December 31, 2024, other expense, net was $1.5 million due to recognized losses on the sale or disposal of fixed assets. In contrast, for the years ended December 31, 2023 and December 31, 2022, the other income, net amounts were $2.3 million and $2.5 million, respectively, largely driven by gains on similar disposals.

Loss on Early Extinguishment of Debt

The increase in the loss on early extinguishment of debt for the year ended December 31, 2023 was due to the loss recognized for the repayment of certain Term Loans. In all of the periods presented, we also recognized small losses driven by the repricing of certain of our debt in 2024 and 2023 and the repayment of a portion of our outstanding debt in late 2022. For additional information regarding our current portfolio of long-term debt and related significant activity, see Note 12, “Financing Arrangements,” to our consolidated financial statements included in Item 8 of this report.

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Gain on Sale of Business

During the year ended December 31, 2022, we recognized an $8.9 million gain on the sale of a non-core line of business within our Environmental Services segment. For additional information regarding the gain on sale of business in 2022, see Note 5, “Disposition of Business,” to our consolidated financial statements included in Item 8 of this report.

Interest Expense, Net of Interest Income

Interest expense, net of interest income for the year ended December 31, 2024 increased by $26.4 million from the comparable period in 2023. During the year ended December 31, 2023 interest expense, net of interest income included a $8.3 million benefit from settling certain interest rate swaps in January 2023. Absent this benefit, interest expense, net of interest income increased $18.1 million due to higher levels of outstanding debt as a result of the 2024 Incremental Term Loans entered into on March 22, 2024 in connection with completed acquisitions, partially offset by a $7.5 million increase in interest income, generally on our cash investments, for the year ended December 31, 2024. The effective interest rates on our long-term debt for the years ended December 31, 2024 and December 31, 2023 were 5.40% and 5.19%, respectively.

Interest expense, net of interest income for the year ended December 31, 2023 remained relatively consistent with the comparable period in 2022 as higher interest rates on our portfolio of debt obligations were partially offset by the $8.3 million benefit noted above and higher interest income realized. The effective interest rates on our long-term debt for the years ended December 31, 2023 and December 31, 2022 were 5.19% and 4.05%, respectively.

As we exit 2024, the effective rate on our debt is approximately 5.38% given the current interest rate environment and our portfolio of long-term debt and related interest rate swaps. For additional information regarding our current portfolio of long-term debt, see Note 12, "Financing Arrangements," to our consolidated financial statements included in Item 8 of this report.

Provision for Income Taxes

For the year ended December 31, 2024, the provision for income taxes increased $5.7 million from the comparable period in 2023 driven by the increase in pre-tax income. The effective tax rate remained relatively consistent.

For the year ended December 31, 2023, the provision for income taxes was relatively consistent with the comparable period in 2022 despite a decrease in pre-tax earnings. The effective tax rate for 2023 was 24.9% which is higher than the 2022 effective tax rate of 23.5% primarily due to the utilization of unbenefited losses in 2022, which reduced the effective tax rate in that period.

The 2022 effective tax rates benefited from the utilization of previously unbenefited losses in certain of our Canadian entities for which we had previously recognized valuation allowances. As of December 31, 2022, these net operating losses were fully utilized and any remaining valuation allowance, which was nominal, was released.

Liquidity and Capital Resources

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our primary ongoing cash requirements will be to fund operations, capital expenditures, interest payments and investments in line with our business strategy. We believe our future operating cash flows will be sufficient to meet our future operating and internal investing cash needs. We monitor our actual needs and forecasted cash flows, our liquidity and our capital resources,

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enabling us to plan our present needs and fund items that may arise during the year as a result of changing business conditions or opportunities. Furthermore, our existing cash balance and the availability of additional borrowings under our revolving credit facility provide additional potential sources of liquidity should they be required.

Summary of Cash Flow Activity

Net cash from operating activities

Net cash from operating activities for the year ended December 31, 2024 was $777.8 million as compared to $734.6 million for year ended December 31, 2023. This $43.2 million increase in operating cash flows was attributable to higher operating income and lower cash paid for environmental expenditures which was partially offset by higher cash paid for interest and working capital balances.

Net cash from operating activities for the year ended December 31, 2023 was $734.6 million, as compared to $626.2 million for the year ended December 31, 2022. This $108.3 million increase in operating cash flows was attributable to improvement in working capital balances, partially offset by higher cash paid for income taxes, environmental expenditures and interest.

Net cash used in investing activities

Net cash used in investing activities for the year ended December 31, 2024 was $903.7 million, an increase of $328.6 million compared to the year ended December 31, 2023. Cash used for acquisitions increased $358.4 million, primarily because we invested more capital in the acquisitions of HEPACO and Noble compared to the amount spent on acquiring Thompson Industrial in 2023. A $6.3 million net sale of marketable securities in 2024 as compared to a $40.9 million net purchase of marketable securities in 2023 partially offset the additional cash spent on acquisitions. Amounts spent on additions to property, plant and equipment, net of proceeds from the sale and disposal of fixed assets increased $10.5 million, largely driven by notable project spend including $15.9 million spent on the Baltimore, Maryland facility partially offset by lower spend on the Kimball incinerator. Construction on the Kimball incinerator began in 2021 and the project was completed in the fourth quarter of 2024.

Net cash used in investing activities for the year ended December 31, 2023 was $575.1 million, an increase of $186.1 million compared to the year ended December 31, 2022. Amounts spent on additions to property, plant and equipment, net of proceeds from the sale and disposal of fixed assets increased $76.4 million, primarily driven by incremental spend to build the incinerator in Kimball, Nebraska. Total spending in 2023 related to the construction of the Kimball incinerator was $82.6 million compared to $44.9 million spent on the project in 2022. Also contributing to the overall increase in cash used in investing activities was a $40.9 million cash outflow from the net purchase of marketable securities in 2023 compared to a $18.8 million cash inflow from the net sale of marketable securities in 2022. Cash paid for acquisitions, net of cash acquired reflected an increase of $33.3 million due to the acquisition of Thompson Industrial in 2023 for $110.9 million compared to $86.3 million paid for acquisitions in 2022. The cash flows in 2022 also include $16.8 million of proceeds from the sale of a business which didn't recur in 2023.

Net cash from (used in) financing activities

Net cash from financing activities for the year ended December 31, 2024 was $377.0 million as compared net cash used in financing activities of $208.9 million for the year ended December 31, 2023. The primary driver of this change was the incurrence of additional term loans, net of discount, of $499.4 million in 2024. This debt issuance, along with the principal repayments during 2024, resulted in a net cash inflow of $484.3 million in 2024 as compared to a net debt repayment of $124.0 million in 2023. For more information on the debt transactions during 2024 and 2023 refer to Note 12, "Financing Arrangements" to our consolidated financial statements included in Item 8 of this report. Additionally, the company paid $14.9 million more in principal payments on finance leases in 2024 as compared to 2023.

Net cash used in financing activities for the year ended December 31, 2023 was $208.9 million as compared to $187.3 million for the year ended December 31, 2022. The total increase of $21.6 million during 2023 is due to $8.3 million of incremental debt repayments, $6.3 million of incremental deferred financing costs paid and a $5.0 million increase in

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withholdings paid for taxes on vested restricted stock. The increase in the withholdings paid on vested restricted stock is due to the higher share prices at vesting during 2023.

Adjusted Free Cash Flow

Management considers adjusted free cash flow to be a measure of liquidity which provides useful information to both management, creditors and investors about our financial strength and our ability to generate cash. Additionally, adjusted free cash flow is a metric on which a portion of management incentive compensation is based. We define adjusted free cash flow as net cash from operating activities, less additions to property, plant and equipment plus proceeds from sales or disposals of fixed assets. When necessary, management adjusts for the cash impact of items derived from non-operating activities. Adjusted free cash flow should not be considered an alternative to net cash from operating activities or other measurements under GAAP. Adjusted free cash flow is not calculated identically by all companies, and therefore our measurements of adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.

The following is a reconciliation from net cash from operating activities to adjusted free cash flow for the following periods (in thousands):

The increases in Additions to property, plant and equipment in 2024 and 2023 in the table above were primarily driven by the incremental spend on strategic growth initiatives including the Kimball incinerator and, in 2024, the expansion of our Baltimore facility. Total spending on the Kimball, Nebraska incinerator construction through December 31, 2024 was $210.9 million with $76.2 million spent in 2024, $82.6 million spent in 2023 and $44.9 million spent in 2022. In 2024, we spent $15.9 million on the Baltimore, Maryland facility.

Summary of Capital Resources

At December 31, 2024, cash and cash equivalents and marketable securities totaled $789.8 million, compared to $550.8 million at December 31, 2023. At December 31, 2024, cash and cash equivalents held by our Canadian subsidiaries totaled $120.0 million. The cash and cash equivalents and marketable securities balance for our U.S. operations was $669.8 million at December 31, 2024. Our U.S. operations had net operating cash inflows of $702.3 million for the year ended December 31, 2024.

We also maintain a $600.0 million revolving credit facility, of which, as of December 31, 2024, approximately $470.0 million was available to borrow under the facility, with letters of credit of $130.0 million outstanding.

Material Capital Requirements

Capital Expenditures

In 2024, our net capital expenditures were $423.1 million inclusive of $76.2 million in capital spending on the construction of the Kimball, Nebraska incinerator and $15.9 million spent on the Baltimore, Maryland facility. We anticipate that 2025 capital spending, net of disposals, will be in the range of $360.0 million to $390.0 million. This includes a long term growth investment of $15 million that we plan to invest in a Phoenix facility.

We anticipate that the capital spending will be funded by cash from our operations. Unanticipated changes in environmental regulations could require us to make significant capital expenditures for our facilities and adversely affect our results of operations and cash flow.

Financing Arrangements

As of December 31, 2024, our financing arrangements included (i) $545.0 million of 4.875% unsecured senior notes due 2027, (ii) $1,464.9 million of secured senior term loans due 2028, (iii) $300.0 million of 5.125% unsecured senior notes due 2029 and (iv) $500.0 million of 6.375% unsecured senior notes due 2031. As noted above, we also maintain our $600.0 million revolving credit facility with no amounts owed as of December 31, 2024.

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The material terms of these arrangements are discussed further in Note 12, “Financing Arrangements,” to our consolidated financial statements included in Item 8 of this report. In 2025, we expect to pay $15.1 million in principal payments on the secured senior term loans and approximately $150 million in interest payments on the entire portfolio of financing arrangements, assuming the variable rate remains consistent throughout 2025. We expect that future payments of interest will continue to be funded through cash flows from operations and any principal payments will either be funded through available cash from operations or through available financing alternatives. We will continue to monitor our debt instruments and evaluate opportunities where it may be beneficial to refinance or reallocate the portfolio.

As of December 31, 2024, we were in compliance with the covenants of all of our debt agreements, and we believe we will continue to meet such covenants.

Environmental Liabilities

Total environmental liabilities as of December 31, 2024 were $241.5 million, an increase of $11.7 million compared to December 31, 2023. This increase was primarily due to new environmental liabilities, including those recognized as a result of recent acquisitions of $18.7 million, annual accretion of $13.5 million and an $8.9 million increase in environmental liability estimates. These increases were partially offset by expenditures of $27.5 million made during 2024.

We anticipate our environmental liabilities, substantially all of which we assumed in connection with our acquisitions, will be payable over many years and that cash flow from operations will generally be sufficient to fund the payment of such liabilities when required. We have included a schedule of our expected payments as of December 31, 2024, in Note 10, “Closure and Post-closure Liabilities" and Note 11, "Remedial Liabilities,” to our consolidated financial statements included in Item 8 of this report.

Events not anticipated (such as future changes in environmental laws and regulations) could require that payments to satisfy our environmental liabilities be made earlier or in greater amounts than currently anticipated, which could adversely affect our results of operations, cash flow and financial condition. Conversely, the development of new treatment technologies or other circumstances may arise in the future which may reduce amounts ultimately paid.

Letters of Credit

We obtain standby letters of credit as security for financial assurances we have been required to provide to regulatory bodies for our hazardous waste facilities and which would be called only in the event that we fail to satisfy closure, post-closure and other obligations under the permits issued by those regulatory bodies for such licensed facilities. As of December 31, 2024, there were $130.0 million of outstanding letters of credit. See Note 12, "Financing Arrangements," to the accompanying financial statements included in Item 8 of this report for further discussion of our standby letters of credit and other financing arrangements.

Critical Accounting Estimates

Our consolidated financial statements are based on the application of GAAP, which requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses and related disclosures of contingent liabilities. These estimates and judgements cannot be determined with certainty. Actual results could differ from those estimates, and any such differences may be material to our consolidated financial statements. We believe the estimates set forth below may involve a higher degree of judgment and complexity in their application than our other accounting estimates and represent the critical accounting estimates used in the preparation of our consolidated financial statements. Our accounting policies related to these estimates are discussed in Note 2, "Significant Accounting Policies," to our consolidated financial statements included in Item 8 of this report.

We believe our judgments related to these accounting estimates are appropriate. However, if different assumptions or conditions were to prevail, the results could be materially different from the amounts recorded. Our management reviews critical accounting estimates with the Audit Committee of our Board of Directors on an ongoing basis and as needed prior to the release of our annual financial statements.

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Landfill Accounting. We amortize landfill improvements and certain landfill-related permits over their estimated useful lives. The units-of-consumption method is used to amortize land, landfill cell construction, asset retirement costs and remaining landfill cells and sites. We also utilize the units-of-consumption method to record closure and post-closure obligations for landfill cells and sites. Under the units-of-consumption method, we include future estimated construction and asset retirement costs, as well as costs incurred to date, in the amortization base of the landfill assets. Additionally, where appropriate, as discussed below, we include probable expansion airspace yet to be permitted in the calculation of the total remaining useful life of the landfill. If we determine that expansion capacity should no longer be considered in calculating the recoverability of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense. If at any time we decide to abandon the expansion effort, the capitalized costs related to the expansion effort are expensed immediately.

Landfill Assets. Landfill assets include the costs of landfill site acquisition, permits and cell construction incurred to date. These amounts are amortized under the units-of-consumption method such that the asset is completely amortized when the landfill ceases accepting waste. Changes in the determination of when the landfill will cease accepting waste, either through a business decision by management, 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.

Landfill Capacity. Landfill capacity, which is the basis for the amortization of landfill assets and for the accrual of final closure and post-closure obligations, represents total permitted airspace plus unpermitted airspace that management believes is probable of ultimately being permitted based on established criteria. As of December 31, 2024, there were no unpermitted expansions included in management's landfill calculation. 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 our profitability. If we determine that there is less actual expansion airspace at a landfill, this would increase amortization expense recorded and decrease profitability, while if we determine a landfill has more actual expansion airspace, amortization expense would decrease and profitability would increase.

Landfill Final Closure and Post-Closure Liabilities. Landfill final closure and post-closure liabilities recorded at December 31, 2024 and 2023 were $59.4 million in both periods. We have material financial commitments for the costs associated with requirements of the EPA and the comparable regulatory agency in Canada for landfill final closure and post-closure activities. In the United States, the landfill final closure and post-closure requirements are established under the standards of the EPA, and are implemented and applied on a state-by-state basis. We develop estimates for the cost of these activities based on our evaluation of site-specific facts and circumstances, such as the existence of structures and other landfill improvements that would need to be dismantled, the amount of groundwater monitoring and leachate management expected to be performed and the length of the post-closure period as determined by the applicable regulatory agency. Included in our cost estimates are our interpretation of current regulatory requirements and proposed regulatory changes. These cost 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. We perform zero-based reviews of these estimated liabilities based upon a planned schedule, typically every five years or sooner if the occurrence of a significant event is likely to change the timing or amount of the currently estimated expenditures. We consider a significant event to be a new regulation or an amendment to an existing regulation, a new permit or modification to an existing permit or a change in the market price of a significant cost item. Our cost estimates are calculated using internal sources as well as input from third-party experts. These costs are measured at estimated fair value using present value techniques, and therefore changes in the estimated timing of closure and post-closure activities would affect the liability, the value of the related asset and our results of operations.

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 or provincial regulatory agency. These costs generally include the costs required for capping the final cell of the landfill (if not included in cell closure), dismantling 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, generally including 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. Changes in the determination of when the landfill will cease accepting waste, either through a business decision by management, determination that expansion capacity should no longer be considered probable or changes in estimates on annual airspace consumption, will accelerate accrual of these costs.

Non-Landfill Closure and Post-Closure Liabilities. Non-landfill closure and post-closure liabilities recorded at December 31, 2024 and 2023 were $70.4 million and $59.2 million, respectively. We base estimates for non-landfill closure and post-closure liabilities on our interpretations of existing permit and regulatory requirements for closure and post-closure maintenance and monitoring. Our cost estimates are calculated using internal sources as well as input from third-party experts.

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We estimate when future operations will cease and inflate the current cost of closing the non-landfill facility using the appropriate inflation rate and then discounting the future value to arrive at an estimated present value of closure and post-closure costs. 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. We review 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 us to revise a liability estimate include changes in legal requirements that impact our expected closure plan or scope of work, in the market price of a significant cost item, in estimates as to when future operations may cease or in the expected timing of the cost expenditures. Changes in estimates for non-landfill closure and post-closure events immediately impact the required 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. Changes to non-landfill closure and post-closure estimates have not been material. See Note 10, "Closure and Post-Closure Liabilities," to our consolidated financial statements included in Item 8 of this report for the changes to these Landfill and Non-Landfill Closure and Post-Closure liabilities during the years ended December 31, 2024 and 2023.

Remedial Liabilities. Remedial liabilities recorded at December 31, 2024 and 2023 were $111.7 million and $111.2 million, respectively. Remedial liabilities are obligations to investigate, alleviate and/or eliminate the effects of a release (or threat of a release) of hazardous substances into the environment and may also include corrective action under RCRA or the corresponding Canadian regulations. Our remediation obligations can be further characterized as legal, Superfund, long-term maintenance and one-time projects. Legal liabilities are typically comprised of litigation matters that involve potential liability for certain aspects of environmental cleanup and can include third-party claims for property damage or bodily injury allegedly arising from or caused by exposure to hazardous substances originating from our activities or operations or, in certain cases, from the action or inaction of other persons or companies. Superfund liabilities are typically claims alleging that we are a potentially responsible party ("PRP") and/or are potentially liable for environmental response, removal, remediation and cleanup costs at/or from either a facility we own or a site owned by a third-party. Long-term maintenance liabilities include the costs of groundwater monitoring, treatment system operations, permit fees and facility maintenance for inactive operations. One-time projects liabilities include the costs necessary to comply with regulatory requirements for the removal or treatment of contaminated materials.

Amounts recorded related to the costs required to remediate a location are determined by internal engineers and operational personnel and incorporate input from external third parties. The estimates consider such factors as the nature and extent of environmental contamination (if any); 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; the cost of performing anticipated cleanup activities based upon current technology; and 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. Each quarter, our management discusses if any events have occurred or milestones have been met that would warrant the creation of a new remedial liability or the revision of an existing remedial liability. Such events or milestones include identification and verification as a PRP, receipt of a unilateral administrative order under Superfund or requirement for RCRA interim corrective measures, completion of the feasibility study under Superfund or the corrective measures study under RCRA, new or modifications to existing permits, changes in property use or a change in the market price of a significant cost item. Remedial liabilities are inherently difficult to estimate and there is a risk that the actual quantities of contaminants could differ from the results of the site investigation, which could materially impact the amount of our liability. It is also possible that chosen methods of remedial solutions will not be successful and funds will be required for alternative solutions.

Remedial liabilities are discounted when the timing of the payments is estimable and the amounts are determinable, with the exception of remedial liabilities assumed as part of an acquisition that are measured at fair value at the acquisition date.

We establish reserves for estimated environmental liabilities based on acceptable technologies when we determine the liability is appropriate. Introductions of new technologies are subject to successful demonstration of the effectiveness of the alternative technology and regulatory approval. We routinely review and evaluate the sites for which we have established estimated environmental liabilities reserves to determine if there should be changes in the established reserves. The changes in estimates are reflected as adjustments in the ordinary course of business in the period when we determine that an adjustment is appropriate as new information becomes available. Upon demonstration of the effectiveness of the alternative technology and applicable regulatory approval, we update our estimated cost of remediating the affected sites. Changes in our estimates for remedial liabilities have not been material. See Note 11, "Remedial Liabilities," to our consolidated financial statements included in Item 8 of this report for the changes to the remedial liabilities during the years ended December 31, 2024 and 2023.

Acquisitions. 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

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the purchase price over the net assets acquired recorded as goodwill. Intangible assets acquired in a business combination may consist of patents, trademarks and trade names, developed technology, customer relationships and other intangibles. The fair value for acquired customer relationship intangibles is determined as of the acquisition date based on estimates and judgments regarding expectations for the future after-tax cash flows arising from the follow-on revenue from customer relationships that existed on the acquisition date over their estimated lives, including the probability of expected future revenue from these customers, less a contributory assets charge, all of which is discounted to present value. The fair value of the trademark and trade name intangible assets as well as the developed technology intangible assets are determined utilizing the relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is applied to projected revenue supporting the trade name or technology and discounted to present value using an appropriate discount rate. Tangible assets acquired in a business combination include real estate and personal property. When determining the fair value of tangible personal property acquired, we must estimate the cost to replace the asset with a new asset taking into consideration such factors as age, condition and the economic useful life of the asset. Valuations are performed by management or third-party valuation specialists under management's supervision, where appropriate.

Goodwill and Other Long-Lived Assets. We have a significant amount of goodwill associated with previous acquisitions. We conducted our annual impairment test of goodwill as of December 31, 2024 in which we assessed the recoverability of the goodwill associated with our reporting units.

For each reporting unit, we compared the reporting unit's fair value to its respective carrying value and determined that no adjustments to the carrying value of goodwill were necessary. In all cases, the estimated fair value of each reporting unit significantly exceeded its carrying value. We measure fair value for all of our reporting units using an income approach (a discounted cash flow analysis) which incorporates several estimates and assumptions with varying degrees of uncertainty, including estimated revenue growth and operational performance. Such assumptions are subject to variability from year to year and are directly impacted by, among other things, macroeconomic conditions. The discounted cash flow analyses include estimated cash flows for a discrete period and for a terminal period thereafter. We corroborate our estimates of fair values by also considering other factors such as the fair value of comparable companies to businesses contained in our reporting units, as well as performing a reconciliation of the total estimated fair value of all reporting units to our market capitalization.

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. This review is performed by comparing the fair value of an indefinite lived intangible asset to its carrying value. We measure fair value for our indefinite lived intangible assets using an income approach (a discounted cash flow analysis) which incorporates several estimates and assumptions with varying degrees of uncertainty, including estimates of future cash flows associated with the intangible assets. If the fair value is less than the carrying value, the impairment loss is measured as the excess of the carrying value of the asset over its fair value. The estimated fair values of our indefinite-lived intangibles exceeded their carrying values at December 31, 2024.

Our long-lived assets are carried on our financial statements based on their cost less accumulated depreciation or amortization. Long-lived assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be entirely recoverable. When such factors and circumstances exist, our management compares the estimated undiscounted future cash flows associated with the related asset or group of assets to the respective carrying amounts. The cash flows used in this analysis include assumptions and estimates with varying degrees of uncertainty, including estimated revenue growth and operational performance. An impairment loss, if any, would be measured as the excess of the carrying amount over the fair value of the asset and recorded in the period in which the determination is made. Any resulting impairment losses recorded by us would have an adverse impact on our results of operations.

Our future cash flow assumptions and conclusions with respect to goodwill and asset impairments could be impacted by changes arising from (i) a sustained period of economic and industrial slowdowns, (ii) continued reduced demand for base and blended oil products and an inability to price our oil related products and services to maintain profitability, (iii) inability to scale our operations and implement cost reduction efforts in light of reduced demand or (iv) a significant decline in our share price for a sustained period of time. These factors, among others, could significantly impact the impairment analysis and may result in future goodwill or asset impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations.

Legal Matters. As described in Note 18, "Commitments and Contingencies," to our consolidated financial statements included in Item 8 of this report, we are subject to legal proceedings which relate to our past acquisitions or which have arisen in the ordinary course of business. We accrue for liabilities associated with these matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of then currently available facts with respect to each matter. When no amount within a range of estimates is more likely, the minimum is accrued. As of December 31, 2024, we had reserves of $29.8 million consisting of (i) $23.3 million related to pending legal or administrative proceedings, including Superfund liabilities, which were included in remedial

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liabilities on the consolidated balance sheets and (ii) $6.5 million related to federal, state and provincial enforcement actions as well as legal claims, which were included in accrued expenses on the consolidated balance sheets. The inherent uncertainty related to the outcome of these matters can result in amounts materially different from any provisions made with respect to their resolution. In management's opinion, it is not reasonably possible that the potential liability in excess of what is recorded, if any, that may result from these actions, either individually or collectively, will have a material effect on our financial position, results of operations or cash flows.

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