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 Annual Report on 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 sustainable 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, or 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 the 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, a non-GAAP measure that is reconciled to our GAAP net income and described more fully below. The following is a discussion of how management evaluates our 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 customer demand for our wide variety of services, the volume, pricing and mix 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 and 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, 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, 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 - The Safety-Kleen Sustainability Solutions, or 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 provides collection services for used oil, used oil filters and other automotive related fluids, which allows customers to manage these wastes in a responsible and compliant way while also converting these waste streams into high-quality products for re-use. 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
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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 process 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 also impact the overall segment results. In operating the business and evaluating performance, management tracks the volumes of used oil and other waste streams collected 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 revenue generation along with related costs. 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 as well as revenues generated and/or 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 2025 increased 2.4% or $140.9 million to $6,030.8 million, compared with $5,890.0 million in 2024. Our Environmental Services segment direct revenues increased $188.5 million or 3.8% in 2025, compared with 2024, driven by growth in our Technical Services, Safety-Kleen branch core service offerings and Field and Emergency Response services. These increased revenues offset lower contributions from our Industrial Services organization. Direct revenues recorded by our SKSS segment decreased $47.4 million in 2025 compared to 2024 due to lower market-based pricing for both base oil and blended oil products as well as reduced volumes sold. These declines were partially offset by higher revenue from the collection of used oil as pricing for this service increased throughout the year.
Income from operations in 2025 was $673.4 million, compared with $670.2 million in 2024. Depreciation and amortization expense for the year ended December 31, 2025, was $45.1 million higher than the comparable period in 2024, which impacted comparative operating income. Net income for the year ended December 31, 2025, was $391.0 million, a decrease of $11.3 million or 2.8%, compared with net income of $402.3 million for the year ended December 31, 2024.
Adjusted EBITDA, which is the primary financial measure by which we evaluate our operations, was $1,169.9 million in 2025 and $1,116.9 million in 2024, an increase of 4.7% 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 2025 was $866.7 million, an increase of $89.0 million from 2024 primarily due to improvement in working capital balances, lower cash paid for taxes and lower environmental expenditures as compared to the prior year. Adjusted free cash flow, which management uses to measure our financial strength and ability to generate cash, was $509.3 million in 2025, which represented a $151.4 million increase over 2024. This increase was due to the reasons noted above impacting cash flow from operating activities and lower 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, 2025, 2024 and 2023 (in thousands, except percentages):
Summary of Operations
For the years ended December 31,
2025 over 2024
2024 over 2023
Change
% Change
Change
% Change
Direct Revenues (1) :
Environmental Services
Safety-Kleen Sustainability Solutions
Corporate
Total
Cost of Revenues (2) :
Environmental Services
Safety-Kleen Sustainability Solutions
Corporate
Total
Selling, General and Administrative Expenses (3) :
Environmental Services
Safety-Kleen Sustainability Solutions
Corporate
Total
Adjusted EBITDA:
Environmental Services
Safety-Kleen Sustainability Solutions
Corporate
Total
Adjusted EBITDA as a % of Direct Revenues:
Environmental Services (4)
Safety-Kleen Sustainability Solutions (4)
Corporate (5)
Total
N/M = not meaningful
(1) Direct revenue is revenue allocated to the segment performing the provided service or selling the product.
(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 or SG&A expenses is shown exclusive of stock-based compensation which is presented in SG&A expenses on our Consolidated Statements of Operations, but is not included in our measurement of Adjusted EBITDA. Additionally, in 2025, SG&A expenses are shown exclusive of $3.5 million of third-party transaction related costs, which are presented in SG&A expenses on our Consolidated Statements of Operations but are not included in our 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 our total revenue.
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Direct Revenues
There are many factors that 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, or 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 fluctuations. In addition, customer efforts to minimize hazardous waste and regulatory changes in can impact our revenues.
Environmental Services
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Direct revenues
Environmental Services direct revenues for the year ended December 31, 2025, increased $188.5 million from the comparable period in 2024. Technical services revenue increased $126.2 million with contributions across our portfolio of waste disposal services, including stronger volumes at our incinerator and landfill facilities, higher revenues from waste and remediation projects and greater pricing of services provided. On a comparative basis and excluding the impacts of the new incinerator in Kimball, Nebraska, which is not expected to be running at full utilization until the end of 2026, utilization at our incinerators was 89% for the year ended December 31, 2025, as compared to 88% in the same period in 2024. Including the new Kimball incinerator, utilization at our incinerators was 85% for the year ended December 31, 2025. Revenue from our Safety-Kleen branches' core service offerings increased $67.3 million, primarily driven by improved pricing, and to a lesser extent, volume, for our containerized waste, vacuum and parts washer services. Field and emergency response services revenues increased $42.2 million from 2024 primarily driven by incremental revenue from the acquisition of HEPACO. Revenue from our industrial services operations decreased $49.6 million due to lower turnaround activity and related high-value services compared to 2024.
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 2023. 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.
Safety-Kleen Sustainability Solutions
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Direct revenues
SKSS direct revenues for the year ended December 31, 2025 decreased $47.4 million from the comparable period in 2024 largely due to revenues from base oil, which decreased $68.1 million driven by lower pricing and, to a lesser extent, lower volumes sold. Blended oil sales decreased $34.8 million, driven by lower volumes sold and, to a lesser extent, lower pricing. Revenues from contract packaging services decreased $13.2 million in the year ended December 31, 2025, compared to the prior year. These decreases were partially offset by a $43.5 million increase in revenue from the collection of used oil as we increased pricing for these waste oil collection services throughout 2025. Additionally, revenues from the sale of vacuum gas oil and specialty refinery products increased $18.1 million, primarily driven by the incremental contributions of the acquired Noble operations.
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 compared with the prior year. Revenues
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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.
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, healthcare, transportation, maintenance and energy-related costs. We are also subject to uncertainties and cost increases due to the changing regulatory landscape, including trade restrictions and tariffs. We aim to manage these increases through constant cost monitoring and a focus on cost savings 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 workforce and operating structure in an effort to manage our operating margins.
Environmental Services
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Cost of revenues
As a % of Direct revenues
Environmental Services cost of revenues for the year ended December 31, 2025 increased $96.0 million from the comparable period in 2024, while improving as a percentage of revenues due to better leverage of our costs and higher revenues. Commensurate with the revenue growth in the business and the acquisition of HEPACO, labor and benefits costs increased $35.6 million, transportation, vehicle and fuel costs increased $27.0 million and equipment and supply costs increased $11.3 million in 2025 as compared to 2024. The remaining cost increase was spread across various cost categories and was driven by the incremental operations of the HEPACO acquisition. Overall, several cost categories decreased as a percentage of revenues, which reflected better cost leverage across the network and improving operating margins.
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 in 2024 as compared to 2023. 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.
Safety-Kleen Sustainability Solutions
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Cost of revenues
As a % of Direct revenues
SKSS cost of revenues for the year ended December 31, 2025 decreased $32.3 million from 2024 and remained relatively consistent as a percentage of revenues. The overall cost decrease was driven by the lower sales volumes, discussed above, lower acquisition costs of used oil feedstock and a $5.7 million decrease in labor costs due to strategic headcount management actions implemented in 2025. These decreases were partially offset by incremental expenses from the Noble acquisition.
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 was 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 “ Direct Revenue” above, 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.
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Selling, General and Administrative Expenses
We aim to manage our 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 expenses below exclude stock-based compensation expense, which is presented in SG&A on our Consolidated Statement of Operations, but is not included in our 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
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
SG&A expenses
As a % of Direct revenues
Environmental Services SG&A expenses for the year ended December 31, 2025, increased $16.3 million from the comparable period in 2024 and remained relatively consistent as a percentage of revenues. Overall, labor and benefits related costs, including higher employee healthcare costs and incremental costs from the acquired HEPACO operations, increased $27.1 million compared to the same period in 2024. The results of the year ended December 31, 2025, include the impact of reducing the estimated costs to remediate a site by approximately $10 million in the first quarter of 2025 to reflect our conclusion that loss was no longer probable based on the evaluation of available evidence.
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.
Safety-Kleen Sustainability Solutions
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
SG&A expenses
As a % of Direct revenues
SKSS SG&A expenses for the year ended December 31, 2025, decreased $5.6 million and remained relatively consistent as a percentage of revenues. The overall reduction was driven primarily by cost reduction initiatives that were executed late in 2024 and strategic headcount management actions implemented in 2025. These actions resulted in a reduction of labor and benefits related costs of $3.7 million.
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.
Corporate
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
SG&A expenses
As a % of Total Company Direct revenues
We manage our Corporate SG&A expenses commensurate with the overall total company performance and direct revenue levels. As a percentage of our total revenues, these costs remained relatively consistent in 2025, 2024 and 2023.
In total, Corporate SG&A expenses decreased by $6.0 million in 2025. Throughout 2025 we executed several cost management actions in order to reduce the impact of inflation on Corporate SG&A expenses including strategic headcount management actions and expanding the leverage of our Global Capability Center in India. The overall reduction in Corporate SG&A costs was largely attributable to a $8.2 million decrease in environmental and legal reserve costs, as the prior year
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included elevated costs from revised estimates to remediate a Superfund site. Also, severance and integration related expenses for the year ended December 31, 2025 were $4.1 million, a decrease of $7.3 million year-over-year. These reductions were partially offset by a $1.7 million increase in IT costs.
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. Additionally, IT costs increased by $5.1 million. Severance and integration related costs increased $4.9 million to a total of $14.3 million in 2024.
Adjusted EBITDA
Management considers Adjusted EBITDA to be a measurement of performance that provides useful information to both management and investors. Adjusted EBITDA should not be considered an alternative to net income or other measurements under GAAP. As reflected in the reconciliation below, we define Adjusted EBITDA as net income plus accretion of environmental liabilities, stock-based compensation, depreciation and amortization, net other expense, net interest expense and provision for income taxes. Adjusted EBITDA also excludes impacts from certain transactions that are not deemed representative of fundamental segment results. 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):
For the years ended December 31,
Net income
Accretion of environmental liabilities
Stock-based compensation
Depreciation and amortization
Third-party transaction related costs
Kimball startup costs
Other (income) expense, net
Loss on early extinguishment of debt
Gain on sale of businesses
Interest expense, net of interest income
Provision for income taxes
Adjusted EBITDA
As a % of Direct revenues
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Stock-based Compensation
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
% Change
Change
% Change
Stock-based compensation
Stock-based compensation for the year ended December 31, 2025 increased $4.7 million from the comparable period in 2024. This increase was driven by higher expenses related to the probable future achievement of performance metrics as well as incremental expense related to our Employee Stock Purchase Plan, or ESPP.
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 stock price appreciation and higher expenses related to the achievement of performance metrics in 2024.
Depreciation and Amortization
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
% Change
Change
% Change
Depreciation of fixed assets and amortization of landfills and finance leases
Permits and other intangibles amortization
Total depreciation and amortization
Depreciation and amortization for the year ended December 31, 2025 increased $45.1 million from the comparable period in 2024 due to depreciation of fixed assets and amortization of intangible assets acquired from the March 2024 HEPACO and Noble acquisitions; depreciation for the new Kimball incinerator, which was placed in service in December 2024; incremental assets placed in service to support the growth of the business and higher finance lease 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 March 2024 HEPACO and Noble acquisitions, as well as incremental finance lease amortization.
Other Income (Expense), net
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Other income (expense), net
The change in other income (expense) over the periods is due to recognized gains and losses on the sale or disposal of fixed assets driven by the sales price and net book value of assets sold in each period.
Loss on Early Extinguishment of Debt
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Loss on early extinguishment of debt
The increase in the loss on early extinguishment of debt for the year ended December 31, 2025 was due to the loss recognized for the refinancing of our Term Loan debt due in 2028 and our Senior Notes due in 2027, which occurred in the fourth quarter of 2025. We also recognized small losses driven by the repricing of certain of our debt in 2024 and a $2.9 million loss on the repayment of a portion of our outstanding debt in 2023. For additional information regarding our current portfolio of long-term debt and related significant activity, see Note 11, “Financing Arrangements,” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
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Interest Expense, Net of Interest Income
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Interest expense, net of interest income
Interest expense, net of interest income for the year ended December 31, 2025 increased by $8.1 million from the comparable period in 2024. This increase was primarily driven by lower capitalized interest in the year ended December 31, 2025 compared to 2024 as we finished our long term construction of the new Kimball incinerator in late 2024. Interest expense on our outstanding debt instruments was relatively consistent for the year ended December 31, 2025 compared to 2024. The effective interest rates on our long-term debt for the years ended December 31, 2025 and December 31, 2024 were 5.24% and 5.40%, respectively. Overall, interest expense was partially offset by a $6.3 million increase in interest income, generally on our cash balances, in the year ended December 31, 2025 compared to the year ended December 31, 2024.
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 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.
As of December 31, 2025, the effective rate on our debt was approximately 5.32% 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 11, “Financing Arrangements,” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Provision for Income Taxes
For the years ended December 31,
2025 over 2024
2024 over 2023
(in thousands, except percentages)
Change
Change
Change
Change
Provision for income taxes
Effective tax rate
For the year ended December 31, 2025, the provision for income taxes increased $5.8 million from the comparable period in 2024. The effective tax rate for 2025 was 25.9%, which was higher than the 2024 effective tax rate of 24.6%. The increase in the effective tax rate is primarily attributable to the benefit associated with the revaluation of state deferred taxes recorded in the prior year.
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.
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 Annual Report on Form 10-K. 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.
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Summary of Cash Flow Activity
For the years ended December 31,
(in thousands)
Net cash from operating activities
Net cash used in investing activities
Net cash (used in) from financing activities
Net cash from operating activities
Net cash from operating activities for the year ended December 31, 2025 was $866.7 million as compared to $777.8 million for year ended December 31, 2024. This $89.0 million increase in operating cash flows was primarily due to improvement in working capital balances, specifically higher collections of accounts receivable, as compared to the prior year period, lower cash paid for taxes and lower environmental expenditures.
Net cash from operating activities for the year ended December 31, 2024 was $777.8 million, as compared to $734.6 million for the 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 used in investing activities
Net cash used in investing activities for the year ended December 31, 2025 was $425.8 million, a decrease of $477.9 million compared to the year ended December 31, 2024. In the year ended December 31, 2024 we paid $478.0 million for acquisitions, primarily the acquisition of HEPACO and Noble. Amounts spent on additions to property, plant and equipment, net of proceeds from the sale and disposal of fixed assets decreased $19.8 million, mainly due to the completion of our new Kimball incinerator in 2024. A $23.1 million net purchase of marketable securities in 2025 as compared to a $6.3 million net sale of marketable securities in 2024 partially offset the changes discussed above.
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 2024 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. Amou nts 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) from financing activities
Net cash used in financing activities for the year ended December 31, 2025, was $309.3 million as compared to net cash from financing activities of $377.0 million for the year ended December 31, 2024. For the year ended December 31, 2025 we repurchased $250.0 million of common stock as compared to $55.2 million in 2024, an increase of $194.8 million. Debt transactions, including deferred financing costs paid and principal payments, resulted in a net cash outflow of $21.1 million in 2025 related to the refinancing of certain of our debt facilities. In 2024, debt transactions resulted in net debt proceeds of $475.3 million, reflecting the $500.0 million of incremental debt we raised to fund acquisitions completed during the period. For more information on the debt transactions during 2025 and 2024 refer to Note 11, “Financing Arrangements” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Additionally, we received $4.1 million of incremental proceeds from the issuance of shares under our ESPP in 2025, compared to 2024.
Net cash from financing activities for the year ended December 31, 2024, was $377.0 million, compared to 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 11, “Financing Arrangements” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. Additionally, we paid $14.9 million more in principal payments on finance leases in 2024 as compared to 2023.
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Adjusted Free Cash Flow
Management considers adjusted free cash flow, a non-GAAP measure, to be a measure of liquidity that provides useful information to 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 transactions not deemed representative of operating results. Additionally, adjusted free cash flow excludes significant strategic growth investments, as they are not indicative of free cash flow generation for the current period. For 2025, these significant strategic growth investments include the early stages of construction of the SDA unit adjacent to our East Chicago, Indiana re-refinery and the build out of a hub facility in Phoenix, Arizona, which we refer to as our Phoenix Hub. The amounts spent on these projects in 2025 are described below, from which we expect to realize future long-term benefits. 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):
For the years ended December 31,
Net cash from operating activities
Additions to property, plant and equipment
Cash investment in strategic growth projects (1)
Third-party transaction related costs
Kimball startup costs
Proceeds from sale and disposal of fixed assets
Adjusted free cash flow
(1) Includes $30.4 million capital investment in the SDA unit and $13.0 million capital investment in the Phoenix Hub.
Summary of Capital Resources
At December 31, 2025, cash and cash equivalents and marketable securities totaled $953.7 million, compared to $789.8 million at December 31, 2024. At December 31, 2025, cash and cash equivalents held by our Canadian subsidiaries totaled $229.9 million. The cash and cash equivalents and marketable securities balance for our U.S. operations was $723.8 million at December 31, 2025. Our U.S. operations had net operating cash inflows of $728.8 million for the year ended December 31, 2025.
We also maintain a $600.0 million revolving credit facility, of which, as of December 31, 2025, $453.5 million was available to borrow under the facility, with letters of credit of $146.5 million outstanding.
Material Capital Requirements
Capital Expenditures
In 2025, our capital expenditures, net of disposals, were $403.4 million including the strategic growth investments outlined in the table below. We anticipate that 2026 capital spending, net of disposals, will be in the range of $450.0 million to $510.0 million. This range also includes the strategic growth investment spend in 2026 outlined in the table below.
The following table summarizes our key strategic growth investments (amounts in millions):
2025 Expenditures
2026 Expected Expenditures
Expected Full Project Cost
Expected Completion Date
Phoenix Hub
SDA unit
Fleet growth project
The three strategic growth investments outlined in the table above are considered projects from which we expect to realize future long-term benefits once placed in service. These are incremental to the capital expenditures needed to maintain current operations.
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We anticipate that this 2026 capital spending and future spending for key strategic growth investments 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.
Proposed Acquisition
On February 17, 2026, we signed a purchase agreement to acquire certain environmental businesses of Depot Connect International for an all-cash purchase price of approximately $130.0 million, subject to customary closing adjustments. We intend to fund this acquisition with available cash.
Financing Arrangements
As of December 31, 2025, our financing arrangements included (i) $1,260.0 million of secured senior term loans due 2032, (ii) $300.0 million of 5.125% unsecured senior notes due 2029, (iii) $500.0 million of 6.375% unsecured senior notes due 2031 and (iv) $745.0 million of 5.750% unsecured senior notes due 2033. As noted above, we also maintain our $600.0 million revolving credit facility with no amounts owed as of December 31, 2025.
The material terms of these arrangements are discussed further in Note 11, “Financing Arrangements,” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. In 2026, we expect to pay $12.6 million in principal payments on the secured senior term loans and approximately $146 million in interest payments on the entire portfolio of financing arrangements, assuming the current variable rate remains consistent throughout 2026. 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, 2025, 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
As of December 31,
2025 over 2024
(in thousands)
Change
% Change
Closure and post-closure liabilities
Remedial liabilities
Total environmental liabilities
Total environmental liabilities as of December 31, 2025, were $230.7 million, a decrease of $10.8 million compared to December 31, 2024. This decrease was primarily due to expenditures of $16.1 million made during 2025 and a $13.6 million decrease in environmental liability estimates. The reductions in environmental liability estimates were primarily driven by a decrease of approximately $10 million in the remedial liability for a site where we concluded that loss was no longer probable based on evaluation of available evidence. These decreases were partially offset by annual accretion of $14.3 million and new environmental liabilities of $4.2 million, including measurement period adjustments from prior acquisitions.
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, 2025, in Note 9, “Closure and Post-closure Liabilities” and Note 10, “Remedial Liabilities,” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
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, 2025, there were $146.5 million of outstanding letters of credit. See Note 11, “Financing Arrangements,” to the accompanying financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion of our standby letters of credit and other financing arrangements.
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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 judgments 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 Annual Report on Form 10-K.
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.
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 costs and asset retirement costs for 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. If we obtain permit expansions that increase available airspace at a landfill facility, we may be required to make adjustments which may impact the amortization expense recorded for our landfill assets.
Landfill Assets. Landfill assets include the costs of landfill site acquisition 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, 2025, 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, 2025 and 2024, were $59.8 million and $59.4 million, respectively. 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 and post- activities would affect the liability, the value of the related asset and our results of operations.
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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- obligations are fully accrued at the date the landfill accepting waste. Changes in the determination of when the landfill will 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, 2025 and 2024, were $75.6 million and $70.4 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. 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- liabilities are inherently uncertain due to the possibility that permit and regulatory requirements will change in the future, which impacts the estimation of total costs and the timing of the expenditures. We review non-landfill and post- 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 plan or scope of work, the market price of a significant cost item, estimates as to when future operations may or the expected timing of the cost expenditures. Changes in estimates for non-landfill and post- 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 and post- estimates have not been material. See Note 9, “ and Post- Liabilities,” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the changes to these Landfill and Non-Landfill and Post- liabilities during the years ended December 31, 2025 and 2024.
Remedial Liabilities. Remedial liabilities recorded at December 31, 2025 and 2024, were $95.4 million and $111.7 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 typically comprise 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 that we are a potentially responsible party, or 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 and funds will be required for alternative solutions.
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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 10, “Remedial Liabilities,” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for the changes to the remedial liabilities during the years ended December 31, 2025 and 2024.
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, 2025 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) that 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) that 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, 2025.
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 17, “Commitments and Contingencies,” to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K, we are subject to legal proceedings that relate to our past acquisitions or that 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, 2025, we had reserves of $16.2 million consisting of (i) $11.4 million related to pending legal or administrative proceedings, including Superfund liabilities, which were included in
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remedial liabilities on the consolidated balance sheets, and (ii) $4.8 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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