Clean Harbors, Inc. (NYSE:CLH) Q2 2019 Earnings Conference Call Transcript

Jul 31, 2019 • 09:00 am ET

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Clean Harbors, Inc. (NYSE:CLH) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Alan S. McKim

now in its third year of operation.

Incineration utilization came in at 82%, down from a year ago, but this was somewhat expected due to the high number of down days at our plants. We also pulled forward turnarounds of two incineration locations from July to late June. We anticipate fewer down days in the back half of the year and have a strong backlog of waste in our network. This backlog is reflected in our deferred revenue, which increased $7.6 million in the quarter and more than $13.3 million since the year-end.

In the quarter, our average revenue per pound for the incineration increased 15% due to our ongoing focus on driving a higher-value mix of waste streams into our network. Landfill tonnage in Q2 was down 10%, but we view this as just timing as we have some projects kicking off here in Q3. This quarter, we generated about $5 million in Emergency Response revenue, primarily attributed to flood-related work in the Midwest and the Houston Ship Channel.

Moving to Slide 5. Safety-Kleen revenues were -- was up 4% in Q2 due to the growth in the branches, pricing and higher production at our re-refineries. Safety-Kleen's adjusted EBITDA rose 9% and margins improved 120 basis points to 26% due to the higher revenue, our ongoing pricing improvement programs and cost-reduction initiatives within the branches. We're also beginning to reap more of the substantial benefits from the investment we made in 2017 into the Safety-Kleen's national customer care center.

Parts washer services were down, but that was more than offset by other core lines of business. Waste oil collection volumes were strong at 63 million gallons, with the charge-for-oil rate that was higher than a year ago. Direct lube sales accounted for 7% of total volume sold, up from 6% a year ago. Total blended product sales were 28% compared with 27% a year ago.

Turning to our corporate update on Slide 6. As we look at the back half of this year, profitable growth remains our focus. And as I mentioned, we expect volumes to ramp-up considerably, starting here in Q3. We continue to pursue multiple avenues to increase our total blended sales in 2019. We've had reasonably good volumes during the first half in our direct program and like to see that momentum continue as well as driving volumes on the distribution side.

Not too much report today on IMO 2020 or PFAS since we last spoke in early May. Each represents potentially meaningful opportunities for us with one strengthening our Safety-Kleen segment and the other the Environmental Services segment. With IMO 2020, it could materially widen one or both ends of the spread we manage in our Safety-Kleen Oil business. We should begin to see various markets respond to its impending implementation later in the year and hopefully in a way that is going to be favorable to our business.

Turning to our capital allocation strategy on Slide 7. We continue to execute across all 4