Clean Harbors Inc (CLH) 2004 Q3 法說會逐字稿

Good morning. My name is Tamara and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the Clean Harbor, Inc. Third Quarter 2004 Earnings Conference Call. (OPERATOR INSTRUCTIONS.) Mr. Geary, General Counsel, you may begin your conference.

Thank you very much. Good morning, everyone, and thank you for joining us. On the call with me this morning are Alan McKim, our CEO; Mark Burgess, our CFO; Gene Cookson, President of our Site Services Group; and Steve Moinahan (ph), SVP of Planning and Development.

Before we get started, I would like to remind everyone that matters we are discussing this morning and information contained in the press release issued by the Company today announcing our third quarter 2004 financial results that are not historical facts are considered Forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements including predictions, estimates, expectations and other Forward-looking statements generally identifiable by the use of words such as believes, hopes, expects, anticipates, plans to, estimates, projects or similar expressions are subject to risks and uncertainties that could cause actual results to differ materially.

Accordingly, participants in today's call are cautioned not to place undue reliance on these Forward-looking statements which reflects management's opinions only as of this date, November 4th, 2004. Information on the potential factors and detailed risks that could affect the Company's actual results of operations is included in the Company's filings with the SEC, including but not limited to our Form 10-K for the year ended December 31, 2003 and our subsequent 10-Qs. The Company undertakes no obligation to revise or publicly release the results of any revision to the Forward-looking statements made in today's press release or conference call other than through the filings that will be made with the SEC concerning this reporting period.

In addition, I would like to remind you that today's discussion will include references to earnings before interest, taxes, depreciation and amortization, commonly known by the acronym EBITDA. EBITDA is a non-GAAP financial measure and is intended to serve as a compliment to results provided in accordance with accounting principles generally accepted in the United States. Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of the Company's performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in Clean Harbor's news release dated today, November 4th, 2004. A copy of this can be found at the Company's website, CleanHarbors.com. A copy also has been furnished as an 8-K with the SEC. And now, I would like to turn over the call to our CFO, Mark Burgess for his financial review. Mark.

Thanks, Bill, and good morning everyone. The positive momentum associated with Clean Harbor's revenue growth and productivity initiative continued to trend positively in Q3. Our revenues grew 8 percent to 162.7 million compared with 151.1 million in the year ago quarter. This growth was achieved through successes in securing large facility projects, particularly in our landfill assets. In addition, we generated a significant number of base business wins with Fortune 500 companies that will positively impact a number of different disposal technologies going forward. Finally, improving economic conditions also helped improve our top line revenues as well.

Landfill volumes in the quarter were very strong, incineration volumes were strong as well. However, capacity utilization this quarter approximated 85 percent as a result of general maintenance shut-down days. Our waste water volumes were up 10 percent year-over-year as well. Gross profit for Q3 grew to 45.8 million from 42.4 million in Q3 2003. Growth and margin occurred because of the higher volumes, the successful implementation of various cost reduction initiatives including the internalization of waste and transportation, head count reductions and reduced insurance costs. These positives were -- positives were somewhat offset by certain start-up costs associated with growth initiatives in our site service business and the planned maintenance shut-down days in the quarter which impacted throughput that I mentioned earlier. Pricing remained relatively flat in the quarter.

SG&A for Q3 were 26.2 million versus 26.4 million in Q3 '03. As a percentage of revenues, SG&A decreased by 135 basis points in the quarter year-over-year. Improvement was achieved because of head count reductions, our ability to leverage sales on flat spending, and overall tight spending controls. These improvements were offset by approximately $800,000 in expenses accrued associated with (indiscernible) required and higher bonuses and commission accruals in the quarter. On a go forward basis, we expect to spend around $26 million in SG&A.

Accretion in the quarter was 2.5 million compared with 2.7 million in Q3 '03. Our depreciation and amortization expense was 5.8 million in Q3 versus 6. -- 5.8 million in Q3 versus 6.7 million in Q3 '03. Depreciation was less in the quarter as a result of purchase accounting adjustments made that lowered the total amount of fixed assets last year and the depreciation on them accordingly, as well as assumption changes to the highly probable air space on certain landfills that have decreased depletion accruals in 2004.

Operating income was 11.2 million for the quarter. This is up significantly from the $6.5 million we reported in Q3 of last year. As a percentage of sales, operating income improved to 6.9 percent versus 4.3 percent a year ago. Interest expense in the quarter approximated $5.6 million. This compares with $6 million in Q3 '03 and was impacted by lower borrowing requirements as a result of the refinancing in June of this year.

Our net income for the third quarter was 4.4 million or 25 cents per share. This compares with net income of 7.4 million for the third quarter of 2003 which included an $8.7 million non-cash gain associated with the mark-to-market on the embedded derivative on our Series C preferred stock outstanding last year. Given that Series C preferred stock was redeemed in June of year, our financials in Q3 and going forward are no longer impacted by the wild volatility associated with the mark-to-market on this embedded derivative.

EBITDA for the quarter increased approximately 18 percent to 19.6 million. This was at the high end of guidance range and up from 16.6 million for the year ago quarter.

On a year to date basis for the nine months ending September 30th, 2004, revenues approximated 467 million which compares with 465.4 million in 2003. When discounting 2003 revenues for the one time sales associated with the Butchers (ph) Bay oil spill, year-over-year revenues increased by roughly $22 million. Revenues have increased as a result of the growth in our site service base business as well as growth from our large facility projects revenue. The stronger Canadian dollar has also positively impacted total revenues by approximately $4 million on a year-to-date basis.

Operating income for the first nine months of 2004 rose to 24.8 million from 5.8 million in the prior year, primarily as a result of the lower outside disposal costs, lower insurance costs, better leveraging of our fixed cost disposal assets as well as lower SG&A costs resulting from reduced head count.

On a year-to-date, EBITDA has increased from roughly 34 million in 2003 to 50.9 million in 2004. On a percentage of sales basis, EBITDA has approximated 12 percent.

From a balance sheet perspective, cash balances approximated 25 million at the end of Q3 versus 18 million at the end of Q2. Balances increased in the quarter because of the strong operating performance, our ability to free up several million dollars of restricted cash that was an overhang from our refinancing, and the deferral on bond interest costs that we will not pay until January '05. These gains were partially offset by some incremental investment in growth capital as well as MACT and landfill spending.

Accounts receivable balances approximated $127 million at the end of the quarter which compares with roughly 125 million at year end and 122 million at the end of Q2. Our days on hand was relatively flat in the -- in the quarter, but while our balances have increased by $3 million since year end and our revenue run rates were up by 10 percent, we have experienced growth improvement in our days -- overall days on hand.

Properties held for sale approximated 12.3 million at the end of the quarter. While we did not record any significant real estate sales in Q3, we have sold several properties already in the fourth quarter. Property, plant and equipment balances approximated 175 million at the end of Q3 versus 166 million at the end of 2003. Capital spending was close to 8 million in the quarter as a result of opportunistic investments in growth related assets in our site service expansion efforts, growth in our container management programs, continued investment in MACT, and investment in rolling stock.

Environmental liabilities approximated 182 million at the end of Q3 versus 182 at year end. Environmental spending was close to $3 million in the quarter. (Indiscernible) debt approximated 153 million at the end of Q3 versus 187M at year end as a result of our June refinancing effort. And we had no loans outstanding against our $30M revolving credit facility.

Despite the seasonal impact of the business, we are expecting revenue growth of 8 to 10 percent in Q4 '04 versus Q4 '03. We also expect EBITDA will be the range of 17-1/2 to $21 million in Q4. We have very few planned maintenance days on our incinerators will help -- which will help the throughput in those operations.

Over the next twelve months, we expect interest expense to approximate 23 to $24 million, accretion expense to approximate $11 million, depreciation and amortization expense to approximate 23 to $24 million. We expect the tax provision to be in the $4 million range and capital and environmental spending should approximate 30 to 35 million over the next four quarters.

We continue to work diligently on the efforts associated with Sarbanes Oxley 404 compliance. Earlier this year, we engaged third party consultants. We've hired an internal audit manager and have added additional resources in order to help us achieve the standards under this act. Our expense with 404 approximated $800,000 in the quarter and we currently anticipate reporting our Q4 results to you in early March as we go through the certification process required under the act.

At this point, I would like to turn the call over to Alan so he can provide additional color to our successes in the quarter and initiatives we are focused on going forward.

Thanks, Mark. Execution was really the key to Clean Harbor's success in Q3. As many of you know, we've laid out a plan for several quarters to increase our share of the environmental and waste management service market, while at the same time, reducing our expenses and overall cost structure. And I'm happy to report that our execution against this plan resulted in a strong quarter of growth and profitability in Q3.

Looking at the revenue side of the equation first, as Mark mentioned, large facility projects were an important contributor to our performance in the quarter. These projects were responsible for feeding large amounts of waste to our incinerators and landfills which achieved strong volumes and revenues in Q3. Our incinerator business also recorded healthy third quarter volumes. As many of you know, the third quarter is generally a slower period for our incinerators as we typically shut them down for routine maintenance. This year, we also completed the MACT tie-in at our Deer Park facility which required an extended shut-down at that facility. Despite all of these obstacles, our incinerator utilization for Q3 was a solid 87-1/2 percent.

During the third quarter, we won business with several new and existing Fortune 500 customers. We also made further progress in marketing and selling our services to customers in our new targeted vertical market program. The three senior industry managers that we brought on board last quarter to lead our vertical market strategy have done a good job, a commendable job spearheading this -- this new initiative. And we're excited about that -- that program.

In addition to the new customer additions, we've begun to better leverage our tech service infrastructure to cross-sell and expand our site services business, which achieved excellent growth in Q3. We also established a new region and opened three new offices for site services in the third quarter.

I think it's also important to look at the performance of our site service business from a geographic perspective. As I've mentioned on previous calls prior to the CSB acquisition, 80 percent of our site service revenue came from the northeast U.S. In the third quarter, we saw significant -- good increases in revenue in several other parts of the U.S., particularly in the Gulf and the West Coast of the United States region. And in Canada, we're also making some nice gains there, significant inroads. Site service revenue in Canada in Q3 alone was up approximately $1.5 million from last year.

Turning to the cost side of things, we continue to look for ways to lower our expenses and improve on our profitability. For the past 18 months, this has meant significantly reducing our head count to right size our organization. However, we really have the -- we believe we've reached an inflection point here in terms of head count and it reflects in the health of our business and our prospects going forward. During the third quarter, our available head count continued to increase. We ended the quarter with approximately 3,730 employees. The vast majority of these additions were primarily chemists and drivers to support our higher revenues in our transportation internalization program.

Throughout 2004, we've made significant strides on our plans to contain costs. We continue to internalize more of our waste stream and began to reduce our outsource -- our outsource transportation expense. While the outside transportation number is still higher than we would like it to be, we continue to expand our own transportation fleet. As I mentioned, we've added drivers in the quarter and we expect to take delivery on over new tractors by the end of the fourth quarter. Also, we're starting to see the incremental effects of the rail assets that we acquired from CST. While still in its infancy, we've been successful in moving more and more drum materials and solid materials to our 18 rail facilities. Going forward, rail continues to represent a strategic opportunity for us to leverage some very under-utilized assets and lower our reliance on outside transportation.

The overall pricing environment remained competitive in the third quarter. However, we did a reasonably good job of passing on rising fuel costs to our customers through fuel surcharges. We anticipate that overall pricing environment will continue to be challenging in the short term.

I mentioned earlier that we completed our investment in Deer Park facility to comply with the government's MACT standards that recently took effect in September. We've talked for several quarters about how we believe that the MACT standards will be a potential boost to our incineration business. As stricter standards are taking effect, owners of captive incinerators are weighing the cost of investing in capital necessary for compliance versus outsourcing. In QT -- excuse me, in Q3, we saw evidence that for many, outsourcing will become more of a viable option.

The reduction in overall incineration capacity will benefit Clean Harbors greatly over the long term. Because of new regulatory hurdles as well as the time and capital resources involved, there have not been any new incinerators or new landfills constructed in the U.S. in the past decade. As these captive incinerators continue to shut down, it'll further increase our leverage as Clean Harbors currently accounts for a majority of North American hazardous waste incineration market.

As we discussed in our last call, we plan to be active on the acquisition front. During Q3, we began to look at a number of small potential acquisitions. Our standards are high. Acquisitions must be accretive to earnings. They must offer us new technology or new customers that can accelerate our growth. We'll continue to seek out these kinds of opportunities in Q4 and beyond.

In summary, we believe our Q3 results demonstrate the combination of cost containment, revenue growth initiatives are working, and the leveraging on our business model continues to improve. Going forward, we'll expand our revenue opportunities through our vertical market approach, cross selling our services and potential acquisitions. We also will continue to target our fixed costs with particular focus on internalizing outside transportation costs. And as we outlined on our press release this morning, our outlook is for a continuation of moderate year-over-year growth in Q4 with a healthy year-over-year increase in EBITDA as well.

This concludes our prepared remarks and we'd be now happy to take any and all questions. Operator.

(OPERATOR INSTRUCTIONS). Mr. Lionel Jolova (ph), Goldman Sachs.

Good morning and congratulations on the results for this quarter. First question, just on the volume side, the increase in volume that you have experienced during the quarter, how much of this increase came from -- was a result of the new MACT circulation and how much was just a result of improving economic trend?

The MACT really did not take effect until the end of September from a regulatory standpoint. And certainly what we have seen at least in October is as companies are looking at the requirements of operating now under these new MACT standards, it is creating upset conditions in their operations and having influences in how they run their facilities, both commercial incinerators as well as captives. So we really did not see any MACT related volumes at all in the third quarter.

Okay. But why would you -- I mean, why do you expect to see an improvement or to see some additional volumes as a result of MACT going forward because I'm thinking if some of the companies that have their own incinerators are still operating these incinerators at this point, it's probably because they are in compliance with MACT. So why would they decide all of a sudden to outsource it to you?

Not necessarily would they be in compliance. Many of them, you know, may still be going through their performance testing. And as you may not know, MACT doesn't necessarily force them to pass or fail. They can change their operations. They can change the types of waste that they can feed. It could have a significant impact on ultimately how efficient their incinerator will be able to run under these new MACT standards. And so we have seen examples where one very large incineration company is forecasting an '06 shutdown but in the interim are looking at outsourcing a significant stream that was currently being incinerated, you know, in that plant. So it's not an exact science. I think it's going to -- it's going to take a little time for it to work out.

Okay. And just in terms of pricing, it seems that pricing remains competitive and it seems that you're already careful with going forward. I'm just wondering why is pricing flat because volumes are improving and it seems that you're running your facilities at a pretty utilization. And I would guess most of your competitors are probably in the same situation. So why aren't we seeing at this point an up-tick in pricing or why don't you expect an up-tick in pricing in '05?

I think in regard to pricing, you know, as I mentioned in our call in the second quarter, we have been selectively increasing pricing on some of our more difficult materials and focusing particularly on some of the ongoing waste streams to try to offset those capital investments in MACT implications to us. On the other hand, we have been very selective in going after some incremental volume, both for our landfills as well as for our incinerators. We have substantial capacity, particularly in the landfill side. We will have a renewed focus on expanding our landfill business in the coming quarters here and in some cases, going after very large, you know, projects. We will look at selective incremental pricing to target those larger volumes.

Okay. And just moving to the margins, I'm looking at the gross margin for the quarter which was 28.2 percent. And this is relatively flat year-over-year and down slightly from the second quarter despite the stronger sales. Why aren't you seeing an improvement in gross margins at this point?

A couple things in the quarter, this year we had significantly more shutdown days in the incinerators than we did in the previous year. And as a result of that, the throughput through that organization wasn't as -- as high as we would like it. Q4, as Alan talked about, we only ran those at 85 percent utilization as a result of those shutdowns. Second -- so going forward, we would hope to see some expansion in margin as the throughput in the incinerators improves. Second thing is as we started to grow our site service business, there have been some start-up costs associated with that that had impacted margins as well. So, you know, those two things, you know, really probably were the biggest issues why margins were relatively flat in the quarter.

Okay. And last thing, you gave guidance for CAP EX and environmental spending for the next two months. Could you break this down between pure CAP EX and environmental spending?

Yeah. We sort of put those two together. I mean, the CAP EX could be in the 20 to 25 range and the environmental could be in the 10 to 15 range. But overall, yeah, that's how we come up with the 30 to 35.

Okay. Great. And last thing, on the -- in terms of environmental liabilities, any new information during the quarter or anything moving? I've seen that the liabilities aren't changed sequentially. They are still at the same level at 182 million but any new news during the quarter on this front?

No. Really -- really nothing -- really nothing new to report. We spent almost $3 million in the quarter and so we're still very comfortable with the spending sort of guidance that we've been able to -- well, first of all, what we've been able to achieve and then the guidance obviously going forward. But nothing really new to report other than we continue to manage that spend very effectively.

Okay. Great. Thank you very much.

Michael Rother, TJS Securities.

Alan, you mentioned some strong improvements in site services. Could we just start with the segment breakdown on sales and EBITDA?

We -- that'll be disclosed in the Q, Mike --

Okay.

-- so don't have that, you know, right now to share with you.

Okay. And in terms of -- the press release mentions an increase in market share, Alan. Could you comment on where that market share is coming from?

Well, I certainly think on the site services, as I mentioned in my notes that we're growing in the Gulf. And one of the new districts or regions that we set up was in that Gulf Coast region as well as in the West -- the West Coast area. And so we are gaining share, particularly from the site service perspective in those areas. And in Canada, you know, we're really just in our infancy. We won several new large contracts in Canada, but we see Canada as an enormous opportunity for growth. Historically, the Canadian operation was primarily a waste disposal operation and they are by far the leader in Canada. We really want to leverage that infrastructure we have up there. And Gene has been doing a good job of laying out a nice plan for us over the coming years here.

Just following up on Canada, there have been, you know, some news reports about how they want to approach maybe getting a little more strict on waste and how it might be treated before it goes to the landfills and obviously some of the cross border issues. Could you update -- update us on that?

Sure. The OBR standards that we are -- that are here in the United States are not consistent in Canada. And Canada is moving more towards adopting the same kinds of standards. There is draft regulations that have been promulgated. And, you know, we're certainly looking at those and having discussions with the regulators regarding not only what the final rules would be, but also the implementation schedule and what kind of capital investment over the coming years we'll need to make in that facility to be able to pre-treat materials before it ultimately goes into the landfill. You know, really how we've looked at the potential change in regulation in Canada is one of rerouting or redirecting waste materials within our network. We're not anticipating any significant change. It may impact one site versus another positively and negative towards the landfill, for example. But I think overall, it's too soon to tell at this point what the final rules will be and what the implications would be for the Company. But, you know, we own 48 waste treatment and disposal facilities so they'll be no impact whatsoever to our customer base.

Okay. And a final question now in terms of the acquisitions. Is there a size that you think is appropriate at this point and is there any restrictions under the current financing agreements?

You know, in 25 years, we've done 14 acquisitions. And the majority of those have been relatively small in the 5 to 10, $15 million size. Certainly, the acquisition we did a couple years ago was by far the largest in our history. But that's typically the size that we're looking at. The site service business provides a real opportunity. It's a very fragmented market and provides real opportunity for growth. And so we're particularly focused on that area. But there's also some niche facilities on the waste treatment side that we believe can help us expand our business or help up internalize more waste in a particular market. But it's typically in that size.

And the second part of your question which is, you know, are we limited from a credit facility perspective, we do have to achieve certain debt incurrence stats to the extent that we take on additional debt to fund acquisitions. But the kind of acquisitions Alan is talking about would most likely be funded out of cash balances that we have.

Okay. Thanks.

Larry Taylor, CSFB.

I wonder if you could talk a little bit about the prospects for property sales over the next couple of quarters, you know, the relative, you know, potential size of what's sort of been the potential in the near term there.

Yeah. So far this quarter, we've, yeah, we've sold I think about $1 million and a half worth of properties. We had a lot of things in the pipeline, you know, Larry, and it's tough to know exactly when these particular deals will hit or what, you know, what the ultimate closing timing associated with that would be. But, yeah, we still believe that over the next 12 months, we should be able to sell the majority of the assets that we have, you know, in that -- in that bucket to sell.

Okay. And in terms of -- you mentioned some of the contracts that you've developed with the -- new contracts with Fortune 500, two part question relating to that. Number one, can you give us a little more detail on the type of services you're providing? What's different, if anything, about the approach there? And then second, I wonder if you could give us a comment on the pricing in that segment of your business?

Yeah. The, you know, the focus on pharmaceuticals is an example, is one that we've had for the last couple years. We've got some wonderful relationships there in that -- in that segment. We have been very fortunate in getting several sole source contracts. And most of the pharmaceutical industry uses almost all of our lines of business, all of our service offerings. You know, it is certainly competitive when you -- when you're going after some of these large mega-contracts, you know, that are $10 to $15 million in scope. But there is also a lot of other value-added services that we're bringing to the table regarding our systems and our technologies. And so it's not purely based on price. So we feel very good about our ability to target those markets and win those contracts without simply being the low cost provider out there.

Okay. Can you give us some sense of pricing - higher, lower than it has been since it sounds like volume is up there?

In regard to the contracts that we're winning?

Yeah.

I think in some of these, you know, in some of these sourcing initiatives that some firms are -- have been implementing, you know, where they're bringing in their top three suppliers and trying to go to a sole source, you know, clearly we need to come up with ways of lowering the total cost of ownership to those clients. I'd like to think that our pricing has been relatively flat in that area on these large bake offs so to speak. But that our lower cost approach is really looking at their total cost and helping them realize savings by putting people on customer sites and other ways of helping them reduce their -- maybe their own third party spend, so offering them recycling technologies. We've initiated a strong initiative here for recycling everything from solvents to oils to, you know, electronic waste and so forth. So I think as it relates to pricing specifically just for disposal, we're really trying to hold the line on that an in some cases, trying to move it in the positive direction.

And lastly, looking at your environmental liabilities, I guess there's some lumpiness in terms of, you know, some of them being of a relatively large size. And, you know, ongoing efforts on your part to sort of resolve those. Any updates on any of those major liabilities and any progress that you're making in that regard?

You know, I guess we would just, you know, categorize the fact that for the second year, you know, we're going to show that the amount of spend year after year is going to be considerably less than what we had thought going into this acquisition. We continue to be very pleased with the performance of our group that's managing all those discontinued operations. There has been no change one way or the other regarding estimates at the various sites that we're working on. And I don't think we see any change really other than business as usual there.

Perfect. Thank you.

(OPERATOR INSTRUCTIONS). Mark Hoffman, Lezard (ph).

Just had a question about -- well, I guess a couple questions about the taxes. Will you actually be a cash payer of taxes this year, next year, and, you know, when -- when you think you might see the NOL run out or --?

Yeah. To answer your question, we will be a cash tax payer. It's -- while we have NOL's in the U.S., we are a taxpayer in Canada. As a result of that, we will be paying cash taxes as outlined earlier.

Okay. So that's the $4 million number.

Correct.

Now, would you, in a related -- well, not related question but to your comment earlier about the spend on environmental liabilities, if you're spending less, would there be a revaluation at year end this year or somewhere in the future of your balance sheet liability?

We are required and every quarter, we look at the estimates associated with these liabilities. And to the extent that we would determine that we were too conservative or not conservative enough, we make adjustments associated with those. So, you know, at this point, at the end of the quarter, we didn't change any estimates, you know, significantly from what they had been historically. As we continue to learn more about these liabilities, there's the opportunity to do that, but at this point, nothing really more to report.

So that wouldn't flow through the income statement but that would be a credit to the owner's equity, is that correct? If you made any adjustments downward?

Adjustments downward or upward would flow through the income statement.

Okay. I guess below or above the line then, you know, special --.

That's -- it would go through as a cost of sale.

Okay. But you'd be able -- you would outline that?

We always do.

Highlight that.

We always do in the Q, that's correct.

Okay. Thank you.

Follow up question, Lionel Jolova, Goldman Sachs.

Yes. I might have missed the numbers but you told us that waste water volumes were up 10 percent this quarter. Can you give us -- can you tell us how much landfill volumes and incineration volumes were up during the quarter?

The landfill volumes, we don't have here in front of us. The incineration volumes, again, we ran the business, as we said, really last quarter at about, really at 100 percent utilization. We were down at 87-1/2 percent this particular quarter. So yeah, the volumes obviously were impacted by that.

Okay. But landfill volumes were up if you don't -- if you don't have the number?

Yeah. Landfill volumes were up. We just don't have the number here.

Okay. Great. Thank you.

Michael McCormick, Gilder Gagnon.

Most of my questions have been answered but Mark, did I understand you correctly that you said your receivables days improved in the quarter because I think that they increased a little bit and maybe you can talk a little bit about some of those receivable goals you have going forward?

In the quarter, no, they were relatively flat and maybe went up a day, Mike. Year -- at the -- versus where we're at the end of the year, they are down. We didn't make a whole lot of progress this quarter as it relates to receivables, you know, improvement. That being said, there is a, you know, very, very significant focus, you know, on this. And I think by year end that we can -- we can expect some improvement from where we were at the end of Q3. But during the quarter, really performance is relatively flat with where we had been.

Okay. Could you give us some kind of idea about working capital improvements you think you could, you know, improvements to the balance sheet you can make to improve, you know, kind of cash flow, you know, kind of -- I don't know whether you want to think about it quarterly or annually or -- are there any targets you can take on from that standpoint?

Yeah. You know, I think, you know, long term we like to believe at least, you know, in the relatively near term, we have an internal goal of just getting our receivables down to 60 days. And again, the organization is very focused on that and I would -- I think that we all believe that we can move towards that in Q4 and then going into next year, get closer to that as well. The assets held for sale, as we talked about earlier, obviously is another opportunity for cash flow generation. From a payable side, I think that we are paying our, you know, the trade in appropriate terms, you know, given what our levels of volume are. And so the only other areas will be really on the CAP EX and the environmental spending side. And we provided guidance earlier obviously on those as to where we think we can end up.

Okay. Could -- did you make any shipments or did you take any waste on your New Jersey projects, the Army Corps?

No.

Okay. You did not?

We did not take any waste there.

And now that the accreting preferreds and all of that is beyond and past us, should we kind of start focusing more on operating margin improvements in your business more from a -- than an EBITDA type situation?

I think, you know, that's certainly another way to look at and an appropriate way to look at it. The good news about this refinancing is the volatility associated with the embedded derivative is now gone so it should provide better -- I guess less volatility in our earnings which obviously is very good for everybody in helping people understand the successes of the Company.

And it looks like you spent a little bit more on the CAP EX program this quarter than you've been -- and you said they were opportunistic and so forth. Can you kind of -- but you had free cash flow on the quarter it sounds. Can you kind of talk about maybe free cash flow goals or what you think about that?

I think, you know, we went through what the projected -- obviously what the projected spend items are over the next year from an interest expense perspective, from a CAP EX and environmental spending perspective, from taxes. So, you know, we're not in a position right now to really provide full year EBITDA guidance. But obviously, we're focused on continuing to grow, you know, to grow the business on a top line end EBITDA basis in order to generate more and more cash.

And last question is assuming business trends stay the same, when do you have the ability to renegotiate your synthetic lines?

We have the ability to negotiate it today if we would like, but there is a one year -- there's a one year provision in there where we would have to pay a pre-payment penalty to the extent that we refinanced, you know, prior to that day.

So assuming we wait the entire year and that's true in the next year, with the EBITDA and free cash flow that you may have, what would be the spread you might be able to save on the interest cost just on the synthetic?

You know, I don't know that I have a good number for you on that, but we, you know, that's one of the things that we obviously look at and would hope to be able to provide some additional earnings from going forward.

And you'd in fact drain adjustment into that synthetic interest cost since your interest expense on the one that you gave?

No. We have not.

(OPERATOR INSTRUCTIONS). At this time, there are no further questions. Are there any closing remarks?

Yes. Thanks for participating in today's call and we certainly look forward to speaking to you again when we report our year end and Q4 numbers in early March. Thanks again.

This concludes today's conference call. You may now disconnect.