NOTE 16. OPERATING SEGMENTS

Financial Information by Segment

Our operations are managed in two reportable segments reflecting our internal reporting structure and nature of services offered as follows:

Environmental Services - This segment provides a broad range of hazardous material management services including transportation, recycling, treatment and disposal of hazardous and non-hazardous waste at Company-owned landfill, wastewater and other treatment facilities.

Field & Industrial Services - This segment provides packaging and collection of hazardous waste and total waste management solutions at customer sites and through our 10-day transfer facilities. Services include on-site management, waste characterization, transportation and disposal of non-hazardous and hazardous waste. This segment also provides specialty services such as high-pressure cleaning, tank cleaning, decontamination, remediation, transportation, spill cleanup and emergency response and other services to commercial and industrial facilities and to government entities.

The operations not managed through our two reportable segments are recorded as “Corporate.” Corporate selling, general and administrative expenses include typical corporate items such as legal, accounting and other items of a general corporate nature. Income taxes are assigned to Corporate, but all other items are included in the segment where they originated. Inter-company transactions have been eliminated from the segment information and are not significant between segments.

Effective January 1, 2016, we changed our internal reporting structure by moving the financial results of our Sulligent, Alabama and Tampa, Florida facilities from our Environmental Services segment to our Field & Industrial Services segment. The purpose of this change is to align our internal reporting structure with how we manage our business based on the primary service offering of each facility. Throughout this Quarterly Report on Form 10-Q, our segment results for all periods presented have been recast to reflect this change.

Summarized financial information of our reportable segments is as follows:

	Three Months Ended September 30, 2016
$s in thousands	Environmental Services		Field & Industrial Services		Corporate		Total
Treatment & Disposal Revenue	$	70,719	$	3,737	$	—	$	74,456
Services Revenue:
Transportation and Logistics (1)	17,066		4,073		—		21,139
Industrial Cleaning (2)	—		5,025		—		5,025
Technical Services (3)	—		20,364		—		20,364
Remediation (4)	—		3,326		—		3,326
Other (5)	—		514		—		514

Total Revenue	$	87,785	$	37,039	$	—	$	124,824


Depreciation, amortization and accretion	$	8,665	$	1,356	$	115	$	10,136
Capital expenditures	$	1,960	$	450	$	546	$	2,956
Total assets	$	589,841	$	124,351	$	59,118	$	773,310

	Three Months Ended September 30, 2015
$s in thousands	Environmental Services		Field & Industrial Services (6)		Corporate		Total
Treatment & Disposal Revenue	$	73,487	$	3,504	$	—	$	76,991
Services Revenue:
Transportation and Logistics (1)	18,460		5,840		—		24,300
Industrial Cleaning (2)	—		28,059		—		28,059
Technical Services (3)	—		17,640		—		17,640
Remediation (4)	—		1,253		—		1,253
Other (5)	—		171		—		171

Total Revenue	$	91,947	$	56,467	$	—	$	148,414


Depreciation, amortization and accretion	$	8,619	$	1,930	$	126	$	10,675
Capital expenditures	$	4,365	$	1,516	$	436	$	6,317
Total assets	$	594,421	$	206,341	$	62,614	$	863,376

	Nine Months Ended September 30, 2016
$s in thousands	Environmental Services		Field & Industrial Services		Corporate		Total
Treatment & Disposal Revenue	$	204,352	$	9,386	$	—	$	213,738
Services Revenue:
Transportation and Logistics (1)	47,754		14,416		—		62,170
Industrial Cleaning (2)	—		16,497		—		16,497
Technical Services (3)	—		57,136		—		57,136
Remediation (4)	—		8,816		—		8,816
Other (5)	—		2,136		—		2,136

Total Revenue	$	252,106	$	108,387	$	—	$	360,493


Depreciation, amortization and accretion	$	25,117	$	4,070	$	362	$	29,549
Capital expenditures	$	18,309	$	1,883	$	2,358	$	22,550
Total assets	$	589,841	$	124,351	$	59,118	$	773,310

	Nine Months Ended September 30, 2015
$s in thousands	Environmental Services		Field & Industrial Services (6)		Corporate		Total
Treatment & Disposal Revenue	$	217,045	$	9,723	$	—	$	226,768
Services Revenue:
Transportation and Logistics (1)	49,269		20,496		—		69,765
Industrial Cleaning (2)	—		71,601		—		71,601
Technical Services (3)	—		50,243		—		50,243
Remediation (4)	—		5,492		—		5,492
Other (5)	—		928		—		928

Total Revenue	$	266,314	$	158,483	$	—	$	424,797


Depreciation, amortization and accretion	$	26,047	$	8,040	$	405	$	34,492
Capital expenditures	$	17,226	$	6,588	$	1,879	$	25,693
Total assets	$	594,421	$	206,341	$	62,614	$	863,376

(1)

Includes such services as collection, transportation and disposal of non-hazardous and hazardous waste.

(2)

Includes such services as industrial cleaning and maintenance for refineries, chemical plants, steel and automotive plants, and refinery services such as tank cleaning and temporary storage.

(3)

Includes such services as Total Waste Management (“TWM”) programs, retail services, laboratory packing, less-than-truck-load (“LTL”) service and Household Hazardous Waste (“HHW”) collection.

(4)

Includes such services as site assessment, onsite treatment, project management and remedial action planning and execution.

(5)

Includes such services as emergency response and marine.

(6)

Financial data includes the operations of our Allstate business. We completed the divestiture of Allstate on November 1, 2015.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)

The primary financial measure used by management to assess segment performance is Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest expense, interest income, income tax expense, depreciation, amortization, stock based compensation, accretion of closure and post-closure liabilities, foreign currency gain/loss, non-cash impairment charges and other income/expense, which are not considered part of usual business operations. Adjusted EBITDA is a complement to results provided in accordance with GAAP and we believe that such information provides additional useful information to analysts, stockholders and other users to understand the Company’s operating performance. Since Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or a substitute for analyzing our results as reported under GAAP. Some of the limitations are:

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt;

Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; and

Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

A reconciliation of Net Income to Adjusted EBITDA is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
$s in thousands	2016			2015			2016			2015
Net income	$	10,114		$	9,904		$	26,569		$	17,907
Income tax expense	6,278			6,858			16,828			14,815
Interest expense	4,288			5,081			13,150			16,208
Interest income	(8		)	(17		)	(90		)	(64		)
Foreign currency (gain) loss	224			994			(192		)	1,769
Other (income) expense	19			(387		)	(2,480		)	(1,156		)
Depreciation and amortization of plant and equipment	6,454			6,591			18,561			21,726
Amortization of intangibles	2,651			2,952			7,907			9,558
Stock-based compensation	605			646			2,182			1,736
Accretion and non-cash adjustment of closure & post-closure liabilities	1,031			1,132			3,081			3,208
Impairment charges	—			—			—			6,700

Adjusted EBITDA	$	31,656		$	33,754		$	85,516		$	92,407

Adjusted EBITDA, by operating segment, is as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
$s in thousands	2016			2015			2016			2015
Adjusted EBITDA:
Environmental Services	$	37,747		$	38,420		$	104,352		$	110,778
Field & Industrial Services	4,466			6,435			13,267			15,790
Corporate	(10,557		)	(11,101		)	(32,103		)	(34,161		)

Total	$	31,656		$	33,754		$	85,516		$	92,407

Revenue, Property and Equipment and Intangible Assets Outside of the United States

We provide services in the United States and Canada. Revenues by geographic location where the underlying services were performed were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
$s in thousands	2016		2015		2016		2015
United States	$	111,005	$	138,367	$	325,379	$	392,698
Canada	13,819		10,047		35,114		32,099

Total revenue	$	124,824	$	148,414	$	360,493	$	424,797

Long-lived assets, comprised of property and equipment and intangible assets net of accumulated depreciation and amortization, by geographic location are as follows:

	September 30,		December 31,
$s in thousands	2016		2015
United States	$	398,722	$	400,320
Canada	55,046		49,585

Total long-lived assets	$	453,768	$	449,905