Clean Harbors Inc: Form 10-Q for the period ended Jun 30, 2024

Forward-Looking Statements

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “seeks,” “should,” “estimates,” “projects,” “may,” “likely,” “potential” or similar expressions. Such statements may include, but are not limited to, statements about future financial and operating results, the Company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Forward-looking statements are neither historical facts nor assurances of future performance. Such statements are based upon the beliefs and expectations of Clean Harbors’ management as of the date of this report only and are subject to certain risks and uncertainties that could cause actual results to differ materially, including, without limitation, risks and uncertainties and the items identified in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 21, 2024, and in other documents we file from time to time with the SEC. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date hereof. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these 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 products and services 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 300,000 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 the largest re-refiner and recycler of used oil in North America, offering a unique closed-loop re-refining process that helps customers achieve their sustainability goals.

Performance of our segments is evaluated on several factors of which the primary financial measure is Adjusted EBITDA, which is reconciled to our net income and described more fully below. The following is a discussion of how management evaluates its segments using 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 - Environmental Services segment results are predicated upon the demand by our customers for our wide variety of services, waste volumes managed by delivering such services and project work for which responsible waste handling and/or disposal is required. 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 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”) also impact the overall segment results. 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, 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 fleet customers, distributors, manufacturers of oil products and industrial plants. Segment results are impacted by market pricing, overall demand and mix of our oil products sales, with management’s objective being to limit exposure to commodity market pricing risk through increased production of value added blended lubricants and contracted rate supply agreements with customers. 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 our recycling and disposal network. The results and integration of the acquired operations of Noble Oil Services, Inc. and its subsidiaries (collectively “Noble Oil”) 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 to collect used oil. Levels of activity and ultimate performance associated with this segment can be impacted by economic conditions and product demand in the manufacturing and automotive services markets, product pricing, efficiency of our operations, partnerships, technology, weather conditions, changing regulations, competition and the management of our related operating costs. 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 the three and six months ended June 30, 2024 were $1,552.7 million and $2,929.4 million, compared with $1,397.9 million and $2,705.3 million for the three and six months ended June 30, 2023. Our Environmental Services segment direct revenues increased $137.3 million and $239.1 million or 11.7% and 10.7% for the three and six months ended June 30, 2024, respectively, from the comparable periods in 2023 driven by growth in Technical Services, Field and Emergency Response Services, including the contributions from the acquisition of HEPACO, and Safety-Kleen core service offerings. For the three months ended June 30, 2024, our SKSS segment direct revenues increased $17.5 million or 7.7%, from the comparable period in 2023, driven by contributions from our acquisition of Noble Oil and higher base oil sales. For the six months ended June 30, 2024, SKSS segment direct revenues decreased $15.0 million or 3.2% from the comparable period in 2023, due to lower base oil product revenues resulting from market-driven pricing partially offset by contributions from Noble Oil. Foreign currency translation of our Canadian operations negatively impacted our consolidated direct revenues by $2.9 million and $2.5 million in the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.

Income from operations for the three and six months ended June 30, 2024 was $215.5 million and $341.0 million, compared with $189.8 million and $310.8 million in the three and six months ended June 30, 2023, representing an increase of 13.5% and 9.7%, respectively. Net income for the three and six months ended June 30, 2024 was $133.3 million and $203.1 million, compared with net income of $115.8 million and $188.2 million in the three and six months ended June 30, 2023, representing an increase of 15.1% and 7.9%, respectively.

Adjusted EBITDA, which is the primary financial measure by which we evaluate our segments, increased $40.3 million or 14.0% from $287.5 million in the three months ended June 30, 2023 to $327.8 million in the three months ended June 30, 2024. Adjusted EBITDA increased $55.3 million or 11.0% from $502.6 million in the six months ended June 30, 2023 to $557.9 million in the six months ended June 30, 2024. Overall Adjusted EBITDA growth was driven by 17.8% and 16.9% Adjusted EBITDA growth in the Environmental Services Segment in the three and six months ended June 30, 2024 respectively. 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 the six months ended June 30, 2024 decreased $1.0 million from $235.6 million in 2023 to $234.6 million in 2024. Adjusted free cash flow, which management uses to measure our financial strength and ability to generate cash, was an outflow of $34.1 million in the six months ended June 30, 2024 as compared to an inflow of $34.2 million in the comparable period of 2023. The decrease in adjusted free cash flow was driven by higher spend on property, plant and equipment due to incremental investments in vehicles, machinery and equipment and notable project spend including the acquisition and build out of our Baltimore, Maryland facility and the continued investment in our Kimball, Nebraska incinerator project. 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.”

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 three and six months ended June 30, 2024 and June 30, 2023 (in thousands, except percentages):

N/M = not meaningful

(1) Direct revenues are revenues allocated to the segment performing the provided service.

(2) Cost of revenues are shown exclusive of items presented separately on the consolidated statements of operations which consist of (i) accretion of environmental liabilities and (ii) depreciation and amortization.

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

(4) Calculated as a percentage of total Company direct revenue.

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, competitive industry pricing, overall market incineration capacity including captive incineration closures, changes in the regulatory environment including those related to per- and polyfluoroalkyl substances (“PFAS”), impacts of acquisitions and divestitures, the level of emergency response services, government infrastructure investment, reshoring of domestic 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 and foreign currency translation. In addition, customer efforts to minimize hazardous waste and changes in regulation can impact our revenues.

Environmental Services

(in thousands, except percentages)

Environmental Services direct revenues for the three months ended June 30, 2024 increased $137.3 million from the comparable period in 2023 due to growth across most of our service lines driven by acquisitive growth and incremental revenues from legacy operations. Field and emergency response service revenues increased $98.5 million from the comparable period in 2023 primarily driven by incremental revenue of approximately $80 million from the acquisition of HEPACO as well as a larger number of mid to large scale emergency response events handled by legacy field and emergency response services operations during the three months ended June 30, 2024. Technical services revenue increased $53.8 million with contributions across our portfolio of waste disposal services, including increased volumes and higher pricing at our incinerator and landfill facilities. Utilization at our incinerators increased by 4% to 88% for the three months ended June 30, 2024, as compared to the same period in 2023. Revenues for Safety-Kleen core service offerings grew by $23.6 million from the comparable period in 2023 due to improved pricing and greater demand for our containerized waste, parts washer and vacuum services. These increases were partially offset by decreased revenues from our industrial services operations which declined $40.1 million due to lower industrial turnaround activity for the three months ended June 30, 2024, as compared to the same period in 2023. Direct revenues for Canadian operations of the Environmental Services segment decreased by $2.4 million due to foreign currency translation.

Environmental Services direct revenues for the six months ended June 30, 2024 increased $239.1 million from the comparable period in 2023 due to growth across most of our service lines driven by incremental revenues from recent acquisitions and legacy operations. Field and emergency response service revenues for the six months ended June 30, 2024 increased $113.9 million from the comparable period in 2023 driven by incremental revenue of approximately $85 million from the acquisition of HEPACO along with overall growth in core field and emergency response service offerings. Technical services revenue increased $94.7 million with contributions across our portfolio of waste disposal services. Higher pricing and increased volumes at our incinerators and landfills drove incremental revenue within technical services. Utilization at our incinerators increased from 82% to 83% for the six months ended June 30, 2024 as compared to the same period in 2023. Revenues for Safety-Kleen core service offerings for the six months ended June 30, 2024 grew by $44.5 million from the comparable period in 2023 due to improved pricing and greater demand for our containerized waste, parts washer and vacuum services. Revenue from our industrial services operations declined $17.1 million due to lower industrial turnaround activity for the six months ended June 30, 2024 compared to the same period in 2023, partially offset by incremental revenue from the acquisition of Thompson Industrial Services which occurred in March 2023. Direct revenues for Canadian operations of the Environmental Services segment decreased by $2.1 million due to foreign currency translation.

Safety-Kleen Sustainability Solutions

(in thousands, except percentages)

In the three months ended June 30, 2024, SKSS direct revenues increased $17.5 million from the comparable period in 2023 due to a $20.0 million increase in revenues from the sale of vacuum gas oil and specialty refinery products largely resulting from the acquisition of Noble Oil which took place on March 1, 2024. Revenue from the sale of base oil for the three months ended June 30, 2024 increased $10.6 million from the same period in 2023, due to favorable pricing and higher volumes sold. These increases were partially offset by a $6.6 million reduction in revenues from blended oil sales due to lower pricing despite relatively consistent volume sold and a reduction of $5.3 million in revenues from other product sales.

In the six months ended June 30, 2024, SKSS direct revenues decreased $15.0 million from the comparable period in 2023 largely due to a $17.4 million reduction in revenues from base oil sales driven primarily by lower pricing and, to a lesser extent, lower volumes sold. Revenue from contract packaging decreased $6.0 million and revenues generated from the sales of other products decreased $4.3 million for the six months ended June 30, 2024 as compared to the same period in 2023. These decreases were partially offset by a $10.4 million increase in revenues from the sale of vacuum gas oil and specialty refinery products driven by the acquisition of Noble Oil. Furthermore, revenues from the collection of used oil for the six months ended June 30, 2024 increased $4.1 million as compared to the same period in 2023, which was driven by higher pricing for these services despite a relatively consistent volume of oil collected.

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 internal and external labor, transportation, maintenance costs, and energy related 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 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

(in thousands, except percentages)

Environmental Services cost of revenues for the three months ended June 30, 2024 increased $72.5 million from the comparable period in 2023, however as a percentage of revenues decreased 1.5%. Commensurate with the revenue growth in the business and recent acquisition of HEPACO, labor and benefit related costs increased $43.3 million, equipment and supply costs increased $21.2 million and external transportation, vehicle and fuel related costs increased $4.4 million for the three months ended June 30, 2024 when compared to the three months ended June 30, 2023. Overall, the growth of revenue outpaced cost increases in all major cost categories resulting in improved margins of the segment.

Environmental Services cost of revenues for the six months ended June 30, 2024 increased $132.0 million from the comparable period in 2023, however as a percentage of revenues decreased 1.2%. Commensurate with the revenue growth in the business and recent acquisitions, labor and benefit related costs increased $74.5 million, equipment and supply costs increased $35.6 million and external transportation, vehicle and fuel related costs increased $11.3 million for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. Overall, the growth of revenue outpaced cost increases in all major cost categories resulting in improved margins of the segment.

Safety-Kleen Sustainability Solutions

(in thousands, except percentages)

SKSS cost of revenues for the three months ended June 30, 2024 increased $16.5 million from the comparable period in 2023 and as a percentage of revenues, increased by 1.9%, due to product mix and higher costs from our Noble Oil acquisition. Overall, external transportation costs increased $7.0 million, labor and benefits related costs increased $5.4 million, and production costs increased $1.3 million for the three months ended June 30, 2024, compared to the same period in 2023.

SKSS cost of revenues for the six months ended June 30, 2024 decreased $4.4 million from the comparable period in 2023 but as a percentage of revenues, increased by 1.4% driven by market related pricing decreases discussed in the revenue section above. Overall costs of materials including oil additives and other raw materials decreased by $23.3 million between the six months ended June 30, 2024 and the same period in 2023, due to lower volumes of base oil inventory sold during the period. Partially offsetting these cost decreases were increases in transportation costs of $7.8 million and labor and benefit related costs of $6.9 million which were primarily driven by the operations of the Noble Oil acquisition.

Selling, General and Administrative Expenses

We strive to manage our selling, general and administrative (“SG&A”) expenses commensurate with the overall performance of our segments and corresponding revenue levels. 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.

Environmental Services

(in thousands, except percentages)

Environmental Services SG&A expenses for the three and six months ended June 30, 2024 increased $10.6 million and $16.7 million, respectively, from the comparable periods in 2023, however, remained consistent as a percentage of segment revenues, continuing our trend of leveraging our SG&A base in the midst of revenue growth discussed above. SG&A expenses increased $4.6 million and $5.8 million in the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023, due to additional costs from HEPACO operations. The remaining increases were spread across various cost categories and were driven by overall growth in the segment results.

Safety-Kleen Sustainability Solutions

(in thousands, except percentages)

SKSS SG&A expenses for the three months ended June 30, 2024 increased $2.9 million and remained relatively consistent, as a percentage of revenues, when compared to the same period in 2023. For the six months ended June 30, 2024, SKSS SG&A expenses increased $3.2 million, and as a percentage of revenues, increased 1.0%, when compared to the same period in 2023. Overall, labor and benefit related costs increased $2.5 million and $3.2 million in the three and six months ended June 30, 2024 when compared to the same periods in 2023, mainly driven by the acquisition of Noble Oil.

Corporate Items

(in thousands, except percentages)

Corporate SG&A expenses for the three months ended June 30, 2024 increased $17.0 million yet remained relatively consistent as a percentage of our total direct revenues when compared to the same period in the prior year. The increase in Corporate SG&A expenses for the three months ended June 30, 2024 was driven by a $9.9 million increase in labor and benefits related costs primarily resulting from incremental headcount from the acquired operations and higher incentive compensation, a $3.8 million change in legal reserve costs and a $2.9 million increase in a remedial liability for an existing Superfund site.

Corporate SG&A expenses for the six months ended June 30, 2024 increased $25.7 million yet remained relatively consistent as a percentage of our total direct revenues when compared to the same period in the prior year. The increase in Corporate SG&A expenses for the six months ended June 30, 2024 was driven by an $18.9 million increase in labor and benefits related costs, a $3.8 million change in legal reserve costs and a $2.9 million increase in a remedial liability for an existing Superfund site.

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”). We define Adjusted EBITDA as 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, net. Adjusted EBITDA is not calculated identically by all companies and therefore our measurements of Adjusted EBITDA, while defined consistently 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 table presents Adjusted EBITDA as well as Adjusted EBITDA as a percent of Direct Revenues by segment (in thousands, except percentages):

(in thousands, except percentages)

(1) Environmental Services and SKSS calculated as a percentage of individual segment direct revenues. Corporate Items calculated as a percentage of total Company direct revenues.

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

29

Depreciation and Amortization

(in thousands, except percentages)

Depreciation and amortization for the three and six months ended June 30, 2024 increased by $10.8 million and $21.1 million from the comparable periods in 2023 due to the depreciation of fixed assets and amortization of intangible assets placed in service in the second half of 2023 and throughout 2024 including the incremental assets acquired from the March 2024 HEPACO and Noble Oil acquisitions.

Loss on Early Extinguishment of Debt

(in thousands, except percentages)

During the six months ended June 30, 2023, we recorded a $2.4 million loss on early extinguishment of debt in connection with the repayment of outstanding debt due in 2024.

Interest Expense, Net of Interest Income

(in thousands, except percentages)

Interest expense, net of interest income for the three months ended June 30, 2024 increased $6.4 million from the comparable period in 2023 due to higher levels of outstanding debt as a result of the 2024 Incremental Term Loans entered into on March 22, 2024 as well as higher interest rates on our variable interest debt. Interest expense was partially offset by a $2.4 million increase in interest income in the three months ended June 30, 2024 compared to the comparable period in 2023.

Interest expense, net of interest income for the six months ended June 30, 2024 increased $14.3 million from the comparable period in 2023. During the six months ended June 30, 2023, interest expense, net of interest income included an $8.3 million benefit recognized from settling interest rate swaps in that prior year period.

Absent this benefit, interest expense, net of interest income, for the six months ended June 30, 2024 increased $6.0 million from the comparable period in 2023 due to the 2024 Incremental Term Loans discussed above. Interest expense was partially offset by a $2.9 million increase in interest income in the six months ended June 30, 2024 compared to the comparable period in 2023.

As of June 30, 2024, the effective interest rate on our debt was 5.7%. For the remainder of 2024, we expect interest expense to continue to trend higher than the prior year due to higher levels of outstanding debt and a slightly higher weighted average effective interest rate. For additional information regarding the financing events during 2024 and our current portfolio of long-term debt, see Note 11, “Financing Arrangements,” to the accompanying unaudited consolidated financial statements.

Provision for Income Taxes

(in thousands, except percentages)

For the three and six months ended June 30, 2024, the provision for income taxes increase was consistent with the increase in pre-tax income compared to the prior period. Our effective tax rates for the three and six months ended June 30, 2024 remained relatively consistent compared to the prior periods.

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 as of the date of this report. 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, 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

(in thousands)

Net cash from operating activities

Net cash from operating activities for the six months ended June 30, 2024 was $234.6 million as compared to $235.6 million in the same period in 2023 as increased working capital balances and higher interest payments were mostly offset by higher operating income as well as lower payments for income taxes and environmental liabilities.

Net cash used in investing activities

Net cash used in investing activities for the six months ended June 30, 2024 was $730.7 million, an increase of $383.4 million from the comparable period in 2023. Cash used for acquisitions increased $356.6 million as we paid more for the acquisitions of HEPACO and Noble Oil in 2024 than we did for the acquisition of Thompson Industrial in 2023. Additions to Property, plant and equipment increased $68.7 million, largely driven by investments in vehicles, machinery and equipment for our operations and notable project spend including $15.4 million spent on the Baltimore, Maryland facility, and an increase of $4.9 million in capital spending for our incinerator project in Kimball, Nebraska. The remaining change in net cash used in investing activities was due to the timing of transactions within our wholly owned captive insurance company which resulted in a $16.4 million cash inflow in the six months ended June 30, 2024 as compared to a $24.2 million cash outflow in the six months ended 2023.

Net cash from (used in) financing activities

Net cash from financing activities for the six months ended June 30, 2024 was $455.5 million, as compared to net cash used in financing activities of $142.9 million for the six months ended June 30, 2023. The primary drivers of this change were the incurrence of additional term loans net of discount of $499.4 million in 2024 as compared to a net repayment of term loans in 2023 of $114.0 million. Partially offsetting this activity was an increase in finance lease payments of $3.9 million.

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 believe that adjusted free cash flow should be viewed only as a supplement to the GAAP financial information. We define adjusted free cash flow as net cash from operating activities excluding cash impacts of items derived from non-operating activities, less additions to property, plant and equipment plus proceeds from sales or disposals of fixed assets. Adjusted free cash flow should not be considered an alternative to net cash from operating activities or other measurements under GAAP. Adjusted free cash flow is not calculated identically by all companies, and therefore our measurements of adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.

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

Summary of Capital Resources

At June 30, 2024, cash and cash equivalents and marketable securities totaled $493.3 million, compared to $550.8 million at December 31, 2023. At June 30, 2024, cash and cash equivalents held by our Canadian subsidiaries totaled $31.0 million. The cash and cash equivalents and marketable securities balance for our U.S. operations was $462.3 million at June 30, 2024. Our U.S. operations had net operating cash inflows of $257.9 million for the six months ended June 30, 2024.

We also maintain a $600.0 million revolving credit facility of which, as of June 30, 2024, approximately $463.5 million was available to borrow under the facility, with letters of credit of $136.5 million outstanding.

Material Capital Requirements

Capital Expenditures

Capital expenditures during the first six months of 2024 were $273.0 million as compared to $204.3 million during the first six months of 2023. The increase was driven by incremental investments in our fleet and equipment and Baltimore, Maryland facility, as well as the incremental spend on the Kimball incinerator. We anticipate that 2024 capital spending, net of disposals, will be in the range of $400.0 million to $430.0 million. This projected amount includes capital expenditures of approximately $65 million to finish the Kimball, Nebraska incinerator project and approximately $20 million for the acquisition and build out of our Baltimore, Maryland 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.

During the first six months of 2024, capital spending on the construction of our new incinerator in Kimball, Nebraska was $40.4 million. Total spending on the project as of June 30, 2024 was $175.1 million. We continue to anticipate that the total spend for this project will be approximately $200.0 million and we anticipate it will be operational in late 2024. Additionally, capital spending on the strategic project in Baltimore, Maryland for the first six months of 2024 was $15.4 million for the purchase of the facility and site improvements and we expect to incur an additional $4.6 million relative to this project during the remainder of 2024.

Financing Arrangements

As of June 30, 2024, our financing arrangements include (i) $545.0 million of 4.875% senior unsecured notes due 2027, (ii) $1,472.4 million of senior secured term loans due 2028, (iii) $300.0 million of 5.125% senior unsecured notes due 2029 and (iv) $500.0 million of 6.375% senior unsecured notes due 2031. As noted above, we also maintain our $600.0 million revolving credit facility with no amounts owed as of June 30, 2024.

The material terms of these arrangements are discussed further in Note 11, “Financing Arrangements,” to the accompanying unaudited consolidated financial statements.

As of June 30, 2024, we were in compliance with the covenants of all of our debt agreements, and we believe we will continue to meet such covenants.

Common Stock Repurchases Pursuant to Publicly Announced Plan

The Company’s common stock repurchases are made pursuant to the previously authorized board approved plan to repurchase up to $1.1 billion of the Company’s common stock. During the three and six months ended June 30, 2024, the Company repurchased and retired 23,397 and 50,662 shares, respectively, of the Company’s common stock for total expenditures of $5.0 million and $10.0 million, respectively. During the three and six months ended June 30, 2023, the Company repurchased and retired a total of 36,473 and 58,723 shares, respectively, of the Company’s common stock for total expenditures of $5.0 million and $8.0 million, respectively.

Through June 30, 2024, the Company has repurchased and retired a total of approximately 8.6 million shares of its common stock for $555.9 million under the board approved plan, and as of June 30, 2024, an additional $544.1 million remained available for repurchase of shares.

Environmental Liabilities

(in thousands, except percentages)

Total environmental liabilities as of June 30, 2024 were $230.7 million, relatively consistent with the balance as of December 31, 2023. During the six months ended June 30, 2024, accretion of $6.5 million and increases in environmental liability estimates of $4.1 million were partially offset by expenditures of $9.9 million. The liability estimate increase was primarily driven by a change a remedial liability estimate for a Superfund site of $2.9 million.

We anticipate our environmental liabilities, substantially all of which we assumed in connection with our acquisitions, will be payable over many years and that cash flow from operations will generally be sufficient to fund the payment of such liabilities when required.

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 June 30, 2024, there were $136.5 million outstanding letters of credit. See Note 11, “Financing Arrangements,” to the accompanying unaudited consolidated financial statements.

Critical Accounting Policies and Estimates

There were no material changes in the first six months of 2024 to the information provided under the heading “Critical Accounting Estimates” included in our Annual Report on Form 10-K for the year ended December 31, 2023. For more information regarding our accounting policies, please refer to Note 2, “Significant Accounting Policies” to the accompanying unaudited consolidated financial statements.

There were no material changes in the first six months of 2024 to the information provided under Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our Co-Chief Executive Officers and Chief Financial Officer, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective as of June 30, 2024 to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes to the risk factors from the information provided in Item 1A. in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.