Clean Harbors Inc (CLH) 2005 Q2 法說會逐字稿

Good morning, everyone and welcome to the Clean Harbors second quarter 2005 conference call. My name is Erica and I will be your conference call facilitator.

Before we get started I would like to inform you all that participants are in a listen-only mode. After the speakers' remarks there will be a question-and-answer period. [Operator instructions]

At this time I would like to introduce to you Mr. Bill Geary, Executive Vice President and General Counsel of Clean Harbor. Mr. Geary, you may begin your conference.

Thank you very much, Operator. Good morning, everyone, and thank you for joining us for our Q2 conference call.

On the call with me today are our Chairman and Chief Executive Officer, Alan S. McKim, our Senior Vice President of Planning and Development, Steve Moynihan and I want to extend a warm welcome to our new Chief Financial Officer, Jim Rutledge, who begins his service with the Company today.

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 second quarter 2005 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 the words believes, hopes, expects, anticipates, plans to, estimates, projects, or similar expressions are subject to risk 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 reflect management's opinions only as of this date, August 1, 2005.

Information on the potential factors and detailed risk that could affect the Company's actual results of operation 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, 2004, and our Form 10-Q1 for the quarter ended March 31, 2005, and our Form 10-Q2 which we plan to file on August 9, 2005. 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 by the SEC concerning this reporting period.

In addition, I would like to remind you that today's discussion will include references to EBITDA which is earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure that 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 Harbors news release dated today. A copy of this can be found at the Company's Web site, cleanharbors.com. A copy has also been furnished as an 8-K with the Securities and Exchange Commission.

Now with that said, I'd like to turn the call over to Steve Moynihan for our financial review. Steve?

Thank you, Bill.

Revenues increased to $173.9 million in Q2 '05 from $161.6 million in Q2 '04. This 8% increase was primarily attributable to the following: in our Site Service group, $3.2 million of emergency response revenue associated with the Delaware River spill and $5.7 million in other Site Service wins.

We continue to see growth in both PPM business, which is our PCB transformer business, the oil groups, and in the newer geographic regions as well as in our existing Site Service locations. We also increased revenues by $3.3 million in our Technical Service business.

We are pleased with this growth in both lines of business in light of a slow quarter at our landfills.

Utilization at our incinerators was 90% for the second quarter compared to 86% in Q1 '05, and 100% utilization in last year's second quarter. The decrease in overall tonnage on a year-over-year basis was primarily due to a more normalized number of down days for maintenance in Q2 '05 compared with unusually low number in the prior second quarter of last year.

As a result, we expect the incinerators to run at an improved rate of Q3 '05 over the 88% rate in Q3 '04.

Landfill volumes were down approximately 33% year-over-year due to poor weather conditions at project locations and the continued pushing of projects into subsequent quarters. While we were disappointed to see the project delays for the second consecutive quarter, we do expect to see increased volumes in third quarter of this year. Drum volumes in the quarter were flat in comparison of Q2 '04.

Gross profit increased to $49.5 million in Q2 '05, up from $45.8 million in Q2 '04, an increase of $3.7 million. As a percentage of revenue gross profit increased slightly to 28.4% from 28.3% in Q2 '04.

The percentage was affected in a positive way by the continued reduction in outside transportation costs that were approximately $2 million, or 15% and by the increased revenues in our Site Service business. The 15% reduction in outside transportation costs is the second consecutive quarter with that level of improvement.

These positive variants were offset by the lower utilization at our landfill and incinerators which are high fixed-cost facilities. While fuel costs were up significantly in the quarter, we continued to pass the majority of these costs along to our customers.

Interest accretion was $2.6 million for the quarter, flat with the $2.6 million incurred in Q2 '04.

Depreciation and amortization expense approximated $7.1million in Q2 '05, compared to $6.3 million in Q2 '04. Higher depreciation expense was incurred as a result of expenses associated with the [Mac] and capital projects in 2004, and depreciation associated with new landfill construction as well as depreciation on assets that were previously, had been held for sale in 2004.

For the remainder of 2005 we expect depreciation and amortization to be approximately $7.2 million per quarter.

SG&A expense decreased to $25.3 million in Q2 '05 from $27.6 million in Q2 '04. The reduction was primarily due to reductions in our estimates to complete various environmental projects.

The total costs of salaries and benefits in the quarter were flat with Q2 '04. Third-party costs associated with Sarbanes-Oxley approximated $500,000 in the quarter compared to $300,000 in Q2 '04. On a go-forward basis we expect SG&A to be in the 26 to $27 million range.

Operating income approximated $14.4 million in Q2 '05 versus 9.4 million in Q2 '04, or an increase of $5 million.

For Q2 '05 EBITDA approximated $24.2 million versus $19.4 million in Q2 '04, an increase of $4.8 million, or 24.8%. On a percentage of sale basis we continued to see improvement as EBITDA increased from 12% in Q2 '04 to 13.9% in Q2 '05.

The Company also recorded a non-operating loss of $109,000 in Q2 '05, as compared to a loss of $6.6 million in Q2 '04, which was associated with the mark to market on the Company's deferred stock that was refinanced in June of 2004.

Interest expense increased to $5.9 million in Q2 '05 versus $5.4 million in Q2 '04. This increase took place as a result of approximately $600,000 of interest expense being capitalized in Q2 '04 primarily on the Deer Park [Mac] investment.

Tax expense in the quarter was $1million versus $2.3 million in Q2 '04 as a result of the tax restructuring that the Company engaged in last June. Net income available to common shareholders approximated $7.3 million, or $0.43 per diluted share versus a net loss of 22.9 million, or $1.63 loss per fully diluted share last year.

The 2000 lost included approximately $24 million of non-cash losses associated with the write-off of deferred financing costs and the elimination of the Series C Preferred stock that I had previously mentioned.

From a balance sheet perspective, our cash balance increased $4.2 million from Q1 '05 to $50.2 million. Total accounts receivable increased by approximately $2 million over Q1 '05 as a result of increased revenues of $9 million over the same time period.

Our DSO showed a slight improvement over Q1 '05.

Properties held for sale remained at $8.6 million. Although no additional properties were sold in Q2, we do have a number of properties under agreement.

Net PP&E remained consistent with Q1 '05 balance of $179 million. Capital spending was $7 million for the 6-month period of 2005 compared to $12.9 million for the same time period last year.

Accounts payable balance decreased by $3.9 million as a result of the payments due to subcontractors on the emergency response event that were due at the end of Q1 '05. We continued to see improvement in our deferred revenue as we realized a $1.8 million decrease over the first quarter balance.

As mentioned in the Q1 call, we have improved our handling efficiency, primarily of our U.S. incinerators where we have invested in technology and processing equipment to reduce handling costs and process waste more quickly.

Environmental liabilities were 175 million.4, sorry, $175.4 million at the end of Q2 '05 versus $178.3 million at the end of Q1 '05. Environmental spending was $3.8 million for the first six months of 2005 compared to $4.4 million for the same period in 2004.

Long-term debt remained flat in the quarter, and from a cash flow perspective capital spending and environmental spending approximated $5.8 million for the quarter and $10.8 million for the six-month period. At June 30th, we had no outstanding loans against our $30 million revolving credit facility.

For 2005 we expect cash interest expense to approximate $22 million. Cash taxes, we believe, will be in the $3 million range for the full 2005. Capital and environmental spending should approximate 30 to $35 million.

With that, I would turn the call over to Alan.

Thanks, Steve and good morning, everyone.

Before I begin, I'd like to say a few words about the newest addition to our senior executive team, Jim Rutledge. Jim joins us in the CFO world and we're excited to have him on board.

Jim has three decades of financial experience and most recently was CFO at Rogers Corporation, which is listed on the New York Stock Exchange. Beyond his financial know-how Jim has a lengthy background in operations management. He'll be a strong asset to Clean Harbors going forward.

In the second quarter we extended the momentum that began several quarters ago. Through careful execution of our gross strategy we exceeded our guidance in Q2 and posted another quarter of profitable growth with earnings of $0.43 per share.

Our performance in Q2 reflected the diversity of our business model as strong contributions in certain segments of our business more than offset some unexpected weaknesses in others. The stand-out performer in the quarter was clearly our Site Services business.

Site Services followed up a record quarter in March with an impressive expansion in Q2. We've talked on previous calls about how Site Service represents an important growth vehicle for the Company.

We continue to leverage our extensive network of disposal facilities in Q2 by opening up new service centers, introducing our Site Services to a host of new customers.

We also saw continued contributions in the quarter from the Delaware River oil spill and several other small emergency response events.

We've been long recognized in the Northeast corridor as the Company for choice for on site hazardous waste services both on a planned or emergency basis, and we're now seeing that reputation extend into other parts of North America. Whether it's for oil spills, site decontamination, or a simple tank cleaning job, our brand recognition continues to grow.

Site Services operates in a very large and very fragmented multi-billion dollar market and as each quarter passes, we become more bullish about the potential for this segment of our business.

Turning to Tech Services, overall the demand environment remained relatively healthy in Q2. Year-over-year we posted a nominal increase in Tech Service revenue.

We continue to see a steady stream of business from customers across our key vertical markets. And as Steve mentioned, utilization at our incinerators was relatively strong for the quarter as we experienced a steady flow of volume.

We believe we could have post even better results in Tech Services, our landfill business sharply reversed course from the growth we achieved in the first quarter of this year. That segment of our business was down more than 30% from Q2 of last year.

We believe that the slowdown in the landfill business was primarily due to a lack of facility projects. As most of you know, these large projects feed large amounts of material to our disposal facilities.

In Q2 we saw a healthy pipeline of these types of projects but many did not get underway due to some extreme weather conditions. For example, on the West Coast we had several sizeable projects that got stalled as a result of torrential rains and unworkable site conditions.

Inclement weather aside, we're clearly expecting a better contribution from facility projects as they've been a key focus for Clean Harbors and a growth driver in recent quarters. The fact we've been able to exceed our sales guidance given the decline in facilities projects really speaks volumes about the strength of our overall business.

Now, I'd like to talk about the cost side of the equation. Early in 2005 we established a goal for the Company to further reduce our overall expense structure.

Overall I'm disappointed really with the progress we've made here. We still have a lot of ground to make up to achieve our objective.

We've made good progress in a couple of key areas in Q2, however. As Steve highlighted we continued to advance a series of initiatives that have been ongoing for several quarters.

For some time our top priority has been to reduce reliance on outside transportation. In Q2 outside transportation spending was down about 15% compared to Q2 of last year.

Our progress from a year-to-date perspective is showing positive trends. Despite generating an increase of 34 million in revenue in the first half of this year over the same period in '04, we've lowered our outside transportation spend by more than 4 million during that time.

While we still have a ways to go in this area, we're pleased with the progress we've made hiring additional drivers, expanding our fleet and really leveraging the rail facilities that we own.

We're also continued to do a good job managing our environmental liabilities and limiting our environmental spending. In the less than three years since the acquisition we've reduced our environmental liability significantly, and our environmental spending associated with those liabilities has been lower than anticipated. Year-to-date environmental spending has only been 3.7 million.

Another way that we've been reducing costs, particularly within SG&A has been through our use of technology. Our [inaudible] proprietary software, WIN, on several conference calls because we believe it provides us with a real competitive advantage.

We employ our WIN operating platform in all of our U.S. locations to help monitor and really efficiently manage our operations. During Q2 we began integrating this platform across Canada and in early July we brought our first two Canadian facilities online.

We anticipate having WIN installed throughout Canada by the end of the year. Integrating the workflow from our Canadian operations onto this platform we believe will help us to be more efficiently managing that business and all the resources throughout Canada.

Another area of cost reduction that we've talked about in the past is telecommunications. Year-to-date we've saved 15% or $772,000 from over last year. So a real improvement there.

Now I'd like to take a moment to discuss the overall competitive environment in Q2.

Within the Site Services side of our business we raised prices in certain geographies and for some select services. We believe this is representative of demand out there for our field service and intent to continue, really, to selectively increase pricing where appropriate.

Within the Tech Services side of our business pricing remained extremely competitive for these large facility projects I mentioned earlier. We've been seeing aggressive pricing by some landfill operators.

Through this cycle we've maintained our emphasis on profitable growth versus taking on revenue for revenue's sake. During the quarter we also continued to do a reasonably good job of passing on fuel costs to our customers through fuel surcharges.

We anticipate that the overall pricing environment will continue to be challenging in the near-term for our landfill business.

Before providing guidance and taking your questions, I wanted to close my comments by discussing an important strategic initiative we have underway.

During the past three years our focus has been on fully integrating the CSD assets, right sizing the Company, strengthening our balance sheet and broadening our management team. We have been successful in each of these areas.

In the recent quarters we've shifted our attention now to growth initiatives and increasing profitability. We have initiated a strategic business planning process as our next step in our evolution.

We believe this initiative will drive our growth plan for the next one to three years so that we can really be focusing on our long-term milestones for our business.

In closing, we're confident about the prospects for our Company. Our Q2 performance underscores our position of strength in the industry. We're seeing signs that points to continued growth in our top line, and we know that our cost initiatives are working.

Our four main priorities for the remainder of 2005 are to focus on capturing large scale facility projects, continue to expand our Site Services business, pursue some selective acquisitions, and continue with the ongoing cost reduction initiatives that we've spoken to. Based on these initiatives and current market conditions, the Company expects to grow revenues in the third quarter of 2005 by 5 to 6% year-over-year and to generate EBITDA in the range of 22 to $24 million.

With that said, Operator, could you please open up the call for any questions?

[Operator instructions] Your first question comes from Brian Delaney with Entrust Bank.

Congratulations on another great quarter.

Good morning. Thank you.

Question for you. As part of your prepared remarks you had mentioned that some of the improvement SG&A came from, I guess, more favorable improvements than your estimates for remedial liabilities. What was the actual amount of the favorable change in the quarter?

On environmental, basically there's a number of components. There certainly was a change in estimate and also an overall reduction in spending. I think all the details about that, you know, we'll lay out clearly in the Q for you. There's quite a bit of change going on within that whole environmental area.

Last quarter as well, there was a favorable adjustment of about $4 million, so what is the process you guys go through to get comfortable with what the liability is on a continual basis to say whether or not, you know, there are favorable adjustments or if any at all increases in the reserve are necessary?

Environmental spending is a very important area for us and it's basically something that we need on a quarterly basis to review every project, and as you can imagine with the size of the overall environmental reserve that is out there, that there are a lot of moving parts there. We have a full-time team here focused on all these environmental projects with the goal of reducing the overall cash as well as the liability for the corporation.

So that is something that goes on every single quarter, and, you know, some quarters we have positive things that hit that and other quarters we have negative things that hit the environmental. But we have, I think, over last couple of years have done a really good job of reducing that spending, you know, as we mentioned, 3.7 million really year-to-date.

Okay. So in the Q I guess it should be something north of $2 million that was beneficial in the quarter, based on the comments that the majority of the decrease year-over-year was improvements in this reserve?

Yeah, and I think the one you mentioned in the first quarter, that $4 million, there was a couple of million dollars in that reserve that was particularly aligned to a litigation that was extinguished, I think, right, Bill?

That is correct.

So I think those are the kind of items that we'll break out if they're large enough in the Q for you.

Okay. And then the diluted share count was 17.3, which was down sequentially, yet the basic shares were up sequentially. What were the adjustments to the fully diluted share count for the quarter?

The 17-3, Brian, is the number to look at. The higher number was associated with all of the warrants and the registration of those warrants. So I think when all of that was said and done the actual correct number moving forward is 17-3.

Okay. So we should use that for full-year for fully diluted?

Yes.

Okay. And it was down sequentially, just so I can understand, it was 18-1 last quarter, now down to 17-3. What happened in the quarter?

You know, I don't actually do the calculation, Brian, but it was just the way the whole thing is calculated with the stock price and the option prices, and that was really what the change was.

Okay. I appreciate it, guys. Thank you very much.

Okay.

Your next question comes from Rick Wesolowski with Sidoti Capital.

Good morning.

I got kicked off the call for just a minute, so excuse me if you've answered or if you've given this information already. But what was the total emergency response revenue you recorded during the quarter?

$3.2 million.

And did that all come from the Delaware project you mentioned in the release?

Yeah, that was the completion of that project.

Okay. Could you guys give us an updated view of the incineration market and the prospects for higher pricing across the board within the next, you know couple quarters or so?

We believe overall that the incineration market is running at pretty good utilization right now. We've been able to, you know, to have a good steady flow of volume across all our incinerators.

As Steve mentioned, in the second quarter we had more down days than a year ago, but I think on a move-forward basis we feel pretty good about the volume out there. We've been more efficient at running our incinerators, particularly down in Texas we've reduced inventory considerably there after we installed WIN at the end of last year.

We have seen some real strong interest in us looking at some outsource business from customers who are currently incinerating waste, and we think, again, whether it's the high energy costs out there, or [Mac], that there are a number of nice opportunities out there to increase volumes overall across the markets. So we're pretty optimistic about the incineration business right now.

Is there any catalyst or indication that we would be able to see ahead of time that would result in you guys seeing considerably higher margins than you see now, or is it one day we're going to wake up and the pricing's a lot better?

I don't think there's going to be an event take place here, so to speak, unless there was some, you know, significant capacity reduction in the captive side, but I don't think there'll be a catalyst like that that we can say wake up and see it.

Okay. Switching over to landfill, you mentioned the pricing was tough in the industry. Is that any different than it was say, six or nine months ago?

you know, in a couple of very large projects that we bid on, you know, multi-million-dollar-type projects that were not competitive that we were extremely disappointed with the pricing we saw that was used to win those projects. I think we know that in certain large projects, you know, pricing can become competitive, but when you have a large transportation component in particular, when you relying on rail, you know, there is some real risks on that side of the business.

So we, you know, passed on a couple of these, I think overall it isn't really a lot different than a year ago. I think it was just the size of some of the projects that we missed out on this year we're disappointed with.

Okay. Is that pricing at all hindering the turnaround that you have at some of your individual landfills?

Yes and no. In some of our sites we could clearly use some more volume but I think the greater opportunity is to improve on the permits and the types of materials we can handle.

We put a new landfill organization about six months ago, we just met with them recently in regard to what their strategic plan is and they've got some great ideas to turn around the number of landfills that are dragging the Company's earnings down. So we feel like we've got a good understanding of what the issues are, what we need to do, but in some cases it is volume, but in other cases it's clearly getting the permits changed so that we can be more competitive in a particular market.

Okay. Finally, how many Site Service branches did you add and where were they?

Gene is not here. I'm sorry. I don't have that list here in front of me. But there was an excess of three or four at this point. And our gross strategy overall for Site Services is in the Gulf and in the West and on the West Coast and in Canada.

We relocated a couple of long-term Clean Harbor folks out into the West Coast. We're really excited about them going out there for the next several years to help us grow that business out there. So we've got some good things going out there, but Gene happens to be on the road today.

Okay. Thanks a lot.

Yup.

Your next question comes from Lionel Jolivot with Goldman Sachs.

Going back to the landfills you mentioned that you had a nice bi-plan of business at the end of June. I was just wondering, I mean it seems volumes [inaudible] done so much during the second quarter, have you seen an improvement so far in the third quarter? How was July on the landfill side of the business?

We didn't hear the first part of your question. You had mentioned about the June volume?

Yes. It seems that your volumes, so your volumes [went down] pretty dramatically in the second quarter and you were mentioning that your pipeline of business was relatively solid at the end of June. What have you seen so far in July? Have you seen an improvement in volumes?

Yeah, we have. July has been much better. We've had a good start to the beginning of the new quarter. Looking at our forecast for August it looks the best for the year for our landfills and our facilities projects.

So things, particularly the rain, which really slowed up a lot of digging and a lot of the large remediation projects has really, you know, let up so we can get going on some of these big projects.

Okay. And then going back to the pricing, it seems that, I mean, on the landfill side, you're already dominant in the industry with Waste Management, and you know on the more traditional waste side on the municipal solid waste side, Waste Management is actually raising prices pretty aggressively. I was just wondering if you had seen any movement on their side, in your own business? Have you seen them raising prices, as well?

We haven't on our side of the business, no.

Okay. And, last thing, and it becomes a traditional question, but you keep, I mean, basically your cash position is pretty strong again and typically I think the second half of the year is typically stronger than the first half in terms of free cash flow so what will you do with the cash? I know that you mentioned acquisitions in the past. What kind of acquisitions are you looking at and what kind of timing should we have in mind?

We really have been looking at a number of opportunities out there, but nothing at this time that we're really prepared to talk about, nothing on the pipeline very far, quite frankly. I don't anticipate anything over the next six months, but basically I think at this point we've been real selective in looking at some acquisitions and we just, you know, it just prepared to continue to look and maybe, you know, if the right one comes about we'll be in a very good strong position with our cash to be able to take advantage of one.

Okay. In terms of targets, you would be interested in growing the Site Services first, I guess?

Yeah, overall, you know, if we can continue on that 5% rate, we believe Site Services clearly will be in excess of that because they're a smaller percentage overall of our business and really the greater opportunity for us to grow across the disposal network we now have.

Okay. Thank you very much.

Okay.

Your next question comes from John Riley with CJS Securities.

Good morning, and another good quarter.

Good morning, John.

Question regarding Site Services and the strong growth. You already mentioned about the geographic reach. One of the new services is driving the growth also. Is it CleanPack?

CleanPack is under our Tech Service business and both our CleanPack and our, what we call pole services which is where we put customers on customer sites permanently, both of those have enjoyed some real good successes this year.

In the Site Services business we've been expanding more into the industrial services, expanding not only the geographic presence but some of the lines of business that we do the, chemical cleaning and the materials processing. And so that side of our business has been pretty strong.

Great. Focusing on the cost side you mentioned that you reduced transportation cost by 15%. How many trailers did you take in the quarter and how many more do you expect to take during the year? And then, how far along are you on the transportation side of your total targeted goals?

I think overall, John, probably since the end of last year we've added, I think, about 43 power units. We have not added a lot of trailers because we continue to still have a significant amount of under utilized trailer assets in the Company. We will probably add another 25 tractors and drivers this year.

There continues to be a lot of opportunities to not only internalize outside trends using our own trucks and drivers, but further leverage to rail facilities we have and so we're in the midst of adding more rail assets as well. The rail assets we tend to lease over a long-term lease.

To answer your question, we're still behind on where we should be. As you know, last year we spent in excess of $60 million in outside trans.

Our goal has been to try to get that closer to $30 million. And with that $30 million reduction we believe there's about a 15% savings to the bottom line to the Company. So it is an important cost reduction initiative for us right now.

Great. And then lastly, not to beat a dead horse, but on the incineration side, do you think that you could see further price improvements without additional captive incinerators going down and then just timewise, do you think that there's an opportunity for any one of these captive incinerators to go down this year?

We're seeing a number of companies that we compete with having reduced capabilities regarding [Mac] and having implications because of [Mac]. And for those types of difficult-to-handle waste streams, we believe that there's some opportunity to increase our prices.

And clearly we're trying to improve on the return on the investment that we made, you know, in excess of $25 million in our incineration facility down in Deer Park. So we'd like to think that we can continue to inch up our pricing there on some of those types of waste streams.

Great. Thank you.

Okay.

Your next question comes from Brian White with Morgan Stanley.

Hi. Good morning and congratulations on a great quarter. Just a quick question on the taxes. Do you anticipate that drastic tax decrease that we have in 2005 is going to continue on to '06?

The decrease?

Yes.

Yes, I do. We have approximately $40 million of actually unrecorded net of tax credits between NOLs and foreign tax credits, so from a U.S. standpoint we really should not be a taxpayer for a number of years. So with that $3 million a year tax expense should continue for, you know, a couple more years.

Great. Thank you.

Okay.

Your next question comes from Jeremy Zhu with Wedbush.

Hi, guys. Congratulations on the quarter. Just a quick question. The 8% revenue increase, is that mostly, what portion of that is from price increase versus market share increase over new business pickup?

We probably wouldn't break that out. I wouldn't think that price is a big factor in that at this point. We did see some improvement in pricing on our field service business but overall, as Steve mentioned, the revenue associated with the Delaware spill was a component of that and the rest was really organic growth, I would say.

Okay. Great. Thanks.

Yup.

Your next question comes from Michael McCormick with Gilder and Gagnon.

Good morning, guys, and thanks again for all your hard efforts. Could you talk again, I must have misheard you, what was the total Cap Ex environmental spending for the second quarter?

The Cap Ex was about $3.8 million and environment was about 1.8 million for the quarter.

So what was the free cash flow in the quarter?

I don't have that.

We'll have that in the Q for you. Michael. Cap Ex in environmental for the first six months was 10.7 million.

Okay. Thank you. The receivables, you guys have made a conscientious effort to get some improvement there, you saw some sequential improvement but it seems to be that there's a lot of leverage there still. What do you think of the process?

I think we have another six months before we're going to see a real improvement in our CleanPack and Site Services receivables. That is the area that we have the greatest challenges right now and we have a lot of work to do to improve on that.

We're disappointed with that area. We, as you know, on the accounts payable side that went down significantly.

Yup.

We improved payment cycle to a lot of our suppliers but on the receivables side we got a lot of work to do. But like to think that within the next six months we'll start to see some real fruit from our efforts here.

Um-hum. And were the warrants actually exercised as of yet or were they just registered?

They're not registered yet. We're still in the process of, you know, completing that registration. But at that point they will be registered, but whether or not they were excised is out of our control.

And I know there's been active discussions on the letter of credit facility to renegotiate, and I know you got upgraded by one of the bodies and I think you're waiting for the other. Could you give us an update on that?

We're still looking at that, Michael, and we have, really wanted to get Jim on board and let him get his arms around the business. He joined us today and, you know, clearly that would be one of the objectives that we'd be asking limb to take a lead on for us.

Thanks again, guys.

Okay. Thank you.

Your next question comes from Larry Taylor with CSFB.

Good morning, guys. Most of my questions have been answered but I wonder, Alan, if you can offer us any outlook on environmental liability side. Is there anything that's large that's out there that you guys are working on or close to maybe some resolution on, or should we expect any kind of movement one way or another there this year?

You know, we continue to be pretty optimistic on a number of fronts, and environmental it really is a real focus of ours here. You know, there's obviously the risk that something, you know, will pop up that will offset those positives but overall I think, Larry, we don't have anything at this point that we can publicly speak to that's, you know, from a legal stand point, but I think from a business perspective we're very optimistic with a number of situations we have on our books right now that we can get cleared up within the next six to 12 months.

Okay. Thank you.

Yeah.

To ask a question, press star then the number one on your telephone keypad. Your next question comes from Mark Byth with Interest.

Hi. I just want to get back to the share count question. Your stock was up in the quarter. I presume you didn't repurchase any shares and yet your share count was down by a fair amount. You mentioned before that you didn't know the reason for it but if I could just ask it, maybe if you could put out a press release later just explaining it because it does seem to be a significant issue. I think that would be helpful.

Okay. Certainly. We'll try to clarify that either in a release or in certainly in the filings in the Q.

Thank you.

Okay.

You have a question from Al Kaschalk with Wedbush Morgan.

Morning, Alan.

Morning. On the comments you made in the press release on the landfill on delays on some of the projects, you indicated that some of those were underway. When do you think, or how far along in the second half of '05 will it take until all those projects are either up and running or moving forward in a direction that you're comfortable with?

You know, they all have a story, as you know, and, you know, our guidance, the most, the best visibility we have is, as you know, is the next quarterly guidance. You know, we tend to have a review every Thursday, and, you know, feel pretty good about where we are with the pipeline.

The disappointing thing is, as we've said, is a number of projects got pushed into the third quarter and beyond. You know, many of these are not so long-term, however that, you know, that once they start, you know, there're going to be some significant windfalls. So I don't want to mislead you there.

We rely on a lot of 500,000, $1 million, $1.5 million-type projects like that and when three or four of them get pushed off at the same time it does hurt our margins and our landfills. So we anticipate that those are kicking in right now and that's basically been communicated in our third quarter estimates.

Okay. So it sounds clearly more of timing as a when as opposed to if.

Yes.

Thank you very much.

At this time there are no further questions. Are there any closing remarks, gentlemen?

Thank you very much for joining us in the call, and we look forward to updating you again in our Q3 call. Thanks very much.

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