Clean Harbors - Q3 2015
November 4, 2015
Transcript
Operator (participant)
Greetings. Welcome to the Clean Harbors third quarter 2015 conference call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael McDonald, General Counsel for Clean Harbors Incorporated. Thank you, Mr. McDonald. You may now begin.
Michael McDonald (General Counsel)
Thank you, Robin. Good morning, everyone. Thank you for joining us today. On the call with me are Chairman and Chief Executive Officer, Alan S. McKim, Vice Chairman, President and Chief Financial Officer, Jim Rutledge, and our SVP Investor Relations, Jim Buckley. We have posted our slides for today's call to the investor relations section of our website. We invite you to open the file and follow the presentation along with us. Matters we are discussing today that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Participants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of this date, November 4th, 2015. Information on the potential factors and risks that could affect the company's actual results of operations is included in our filings with the SEC.
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 this morning's call, other than through SEC filings that will be made concerning this reporting period. In addition, I'd like to remind you that today's discussion will include references to non-GAAP measures. Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release, which can be found on our website, cleanharbors.com, as well as in the appendix of today's presentation. Now I'd like to turn the call over to our CEO, Alan McKim. Alan?
Alan McKim (Chairman and CEO)
Thanks, Michael, and good morning, everyone. Thank you for joining us today. Beginning on Slide 3, revenue increased 5% in Q3 to $893 million. Our growth was largely driven by a continuation of emergency response work, which generated nearly $145 million, or 16% of our revenues in Q3. This emergency response work more than offset the headwinds we face from weakness in the energy markets, currency translation, and lower base oil pricing, pricing. And it continued to demonstrate the leverage of our business model as Adjusted EBITDA grew faster than revenue. In fact, Q3 marked the highest quarterly Adjusted EBITDA in our history, and our margins hit 18.5%. The other key points on this slide are that Safety-Kleen Environmental recorded another excellent quarter and that the US Industrials Group also delivered solid growth.
Looking at the segments, starting on Slide 4, Tech Service had a down quarter, both in terms of revenue and profitability. The core of this segment remains strong as drum volumes continue to climb, which helped contribute to our 92% incineration utilization in the quarter. But the market environment was challenging. Oil and gas production waste streams remained lower, hurting our landfill business, which was off 28% from a year ago. We again saw some customer deferrals on some high-margin waste project business. The lower price of fuels also hurt our top line due to reduced fuel recovery charges compared with last year. In addition, industrial core, customers, reduced because of the slowdown really in their business. Turning to Slide 5, Industrial and Field Services revenue nearly doubled in Q3 based on the ER work.
Within the rest of the segment, revenue would have been close to flat, as growth in our US Industrial and Specialty Group, as well as our Base Field Services business, offset the decline in the oil sands and the currency effect. Turnaround activity in the quarter was relatively strong. At the same time, we continued to see a healthy amount of unplanned work as refiners are still running their plants hard. Our refinery team again took market share this quarter as we expanded our footprint in this vertical. Profitability in the segment more than tripled, and margin was up more than 700 basis points. Emergency response, high-margin industrial work, and cost reduction efforts in the oil sands all contributed to these increases. Moving to Slide 6, revenue on newly named Kleen Performance Products segment was down due to the continued decline in base oil pricing.
Today, our posted Group II pricing stands at $2.05 a gallon versus just over $3 a gallon a year ago. While we've been faced with significant back-end price decreases, our team continues to do well on the front end of that spread by lowering both our transportation expenses and our collection costs. We have again taken a leadership role by initiating a shift to charge for oil and for stop fees for generators of hazardous waste oil. The rollout, which began in September, is proceeding well. Blend Q3, flat with a year ago and really consistent where we've been all year. Turning to Slide 7, outside revenue in SK Environmental Services was up slightly, while direct revenue was down 14%, which is entirely due to the reduction in our pay for oil. Profitability rose an impressive 30%.
reflecting volume gains, the contribution from thermal fluids, and cost reductions. Parts washer services were up slightly. We collected 57 million gallons of waste oil, up from a year ago, mainly thanks to thermal fluids. And in Q3, we reduced our average PFO cost by about $0.02 from Q2 as we got closer to zero. With the implementation of our Charge for Oil program and then unilateral stop fees for servicing remote customers in September, we will now see a full quarter effect from that in Q4. Turning to Slide 8, Lodging Services, which operates in the very challenged oil sands region. We really saw revenue decline over 60% and registered only nominal profitability in Q3. All three elements of this segment's business, our fixed lodges, our mobile camps, and manufacturing, are faced with severely limited activity due to the drop in capital spending by our customers.
With Q3 being a seasonally weaker period, the occupancy rates at our primary fixed lodges registered just 19% in the quarter. We are continuing to take steps to address this difficult environment, including cost reductions and throttling back capacity at our manufacturing plant, which we did during the summer. We're also evaluating the potential of relocating our facilities to areas of opportunity, such as British Columbia. Turning to Oil and Gas Field Services on Slide 9, the 29% drop in revenue was in line with our expectations and aligned with the 27% decline in the number of rigs we serviced this quarter. Q3 was typically a seasonal weaker quarter for this segment. We did win some nice seismic projects in Alaska, but that was more than an exception, as nearly all of our energy customers have slashed their exploration budgets.
We serviced an average of 101 rigs in the quarter as we continued to increase our market share in a very shrinking market for both our surface rentals and production services. Average utilization of our key equipment was just 38%. Looking at our corporate initiatives on Slide 10, let me start by discussing the $100 million cost reduction program that we announced in today's press release. As we look at our markets today, we see an environment that really has been materially changed by the drop in crude price and the subsequent elimination of capital spending by many of our customers.
For us, it's had a profound impact on our business, including lodging occupancy and overall activity in Western Canada, certain waste streams, like the drill cuttings, and the prices received for the products that we sell, our recycled products, such as our base oils and our recycled fuel oils. There have been secondary effects as well, such as the strong US dollar and a slowdown in certain verticals. The team has done an admirable job this year in offsetting many of these challenges, and obviously, the emergency response work we did came at a very fortunate time. But as we head into the fourth quarter and into 2016, we have to assume that $40-$50 crude may be with us for quite some time.
Therefore, we are aggressively taking action, and we'll lower our cost structure to a level that enables us to succeed even in this challenged market. Working with our executive team, we've set a target of $100 million in cost takeouts that will be achieved by the end of next year. Our goal is to realize a minimum of $50 million of savings in 2016 and enter 2017 with our $100 million reduction in run rate reached. These actions will center around reduced G&A, office and real estate consolidations, and many other operational gains and efficiencies and productivities. Our plan is to carefully manage down cost without harming our ability to pursue opportunities for profitable growth. Today, we have an addressable cost structure of approximately $2.8 billion, so we're targeting a less than 4% reduction in these costs.
The next initiative I wanna touch on today is the launch of Kleen Performance Products. This new name will serve as the umbrella brand for all our re-refined products and byproducts. It also ties with our efforts to capture sales opportunities and generate growth in our blended business. And at the same time, making Kleen Performance Products a distinct business unit really differentiates it from Safety-Kleen. During 2015, Safety-Kleen has been working to separate out its used motor oil collection business, and we expect that process to be completed in early 2016. Our objective in splitting that out within SK Environmental Services is to enable us to better centralize our sales, logistics, and collection. In addition, it supports our planned growth in our direct blended sales under the Kleen Performance Products brand.
Turning to the planned carve-out of our energy business, many of our steps needed to transition the oil and gas field service and lodging segment into a standalone public entity are done or nearing completion. We are on track to go public when the market conditions improve. Looking realistically at where those businesses are today and the state of the energy sector, that will probably not take place in early next year as we originally targeted. And so the timing will depend on market conditions and also remains subject to our board's approval. In the meantime, we'll continue to manage those two segments carefully, with an emphasis on generating incremental profits and taking market share in a down cycle. Slide 11 is a reminder of our capital allocation strategy we like to share each quarter.
We view our capital and its return on a relative basis, and as Jim will highlight, we continue to repurchase shares and operate that program using a discretionary approach based on stock price, as opposed to just buying a set amount each quarter. We continue to invest in our business with a bias towards attractive long-term growth opportunities, such as the El Dorado incinerator expansion. We are also regularly evaluating potential acquisitions that we can acquire at a reasonable valuation. Moving briefly to our outlook, starting on Slide 12. We have a range of initiatives to revitalize organic growth across the company. Within tech services, we're focused on continuing the growth trajectory of our drum volumes, as well as bulk solids, in order to support our incineration network and in preparation for the new incinerator in Arkansas.
Construction of the facility is on track and on budget, and really scheduled for startup in late 2016. On the landfill side, while we are still working to offset the loss of oil and gas production waste, primarily the drill cuttings, we see a nice pipeline of large volume projects that should only increase. Within industrial and field, we're winding down this year's turnaround season. Both our U.S. and Canadian teams have been busy so far this quarter with refinery work. Within field services, our collaboration with Safety-Kleen continues, and our plans to cross-sell environmental services to TFI are well underway. Within Kleen Performance Products, we wanna get our stalled blending sales growing again by selling our products back to our customers.
Our direct sales channel plan is conducting a pilot program we initiated in Canada, and as we gain insights from that pilot, we will formulate the best path to successfully scale up this program across all of North America. Turning to Safety-Kleen Environmental on Slide 13, the focus is on extending the momentum of that business. In light of the margin compression our base oil business is facing, our aim is to drive down our total collection costs for waste oil while maintaining sufficient volumes to run our plants. TFI is playing an important role in our ability to achieve that goal. Optimizing our network and training the sales force for cross-selling to the TFI customers remains a high priority in the coming quarters. Within lodging, we'll continue to aggressively pursue opportunities rather than just competing in a tight market in the oil sands region.
We are evaluating the network to move any locations as necessary. We continue to seek opportunities to deploy our mobile assets in British Columbia, and toward that end, we're in close contact with pipeline companies and many other firms that may be active in that region. And within the manufacturing, we're ramping up our capacity back up as we have won some nice business in some nontraditional markets. Within oil and gas, we'll remain disciplined as we reduce our cost structure and capitalize on opportunities to take market share from smaller players, many of whom are failing due to the extended downturn. The seismic portion of this business, with its high margin potential, is another area where we're pursuing aggressively, including looking at nontraditional markets and geographies for that group. So with that, let me turn it over to Jim for his financial review. Jim?
Jim Rutledge (Vice Chairman, President, and CFO)
Thank you, Alan, and good morning, everyone. The chart on Slide 15 shows our Q3 direct revenue by segment. Similar to Q2, we had a significant amount of emergency response revenue that accounted for nearly half of the industrial and field services part of our business. As a result, our industrial and field services segment in total accounted for 1/3 of our total quarterly revenue. Technical services followed at 32% of Q3 revenue, as SK Environmental accounted for the majority of the remaining portion, as the weak energy markets and base oil pricing have shrunk the other three segments to well below their historical norms. Turning to our income statement on Slide 16.
Gross profit for the third quarter was $258.7 million, or a gross margin of 29%, down about 0.7% from a year ago, when we had a better mix of high margin business, including the 45%+ margin in our lodging business. On the expense side, SG&A totaled $93.1 million in Q3, or just 10.4% of revenues. This is a 130 basis point improvement from the 11.7% of revenues we posted a year ago. For the full year, we expect our total SG&A dollars to be flat or slightly less than last year.
Although this year's SG&A reflects the increased cost of labor and higher level of administration associated with our emergency response business, this is offset by reduced incentive compensation expense associated with this year's overall results. Depreciation and amortization was down slightly at $69.1 million. The decrease reflects lower amortization during the quarter in our landfill business, partly offset by higher amortization of intangible costs associated with the TFI acquisition. For the full year, we remain on track to meet our original projection for D&A of approximately $270 million. Income from operations increased to $94 million from $80.7 million on an adjusted basis a year ago, primarily as a result of our revenue growth. Adjusted EBITDA increased 8% to a record $165.6 million at the low end of the range we provided in early August.
Included is $2.3 million in integration and severance costs due to our ongoing cost reduction initiatives, particularly in our energy-related businesses. Margins rose 50 basis points to 18.5% this quarter. Our effective tax rate came in at 46.2%. This unusually high tax rate was directly tied to our lower performance in Canada, where corporate rates are lower. Given where we are at the nine-month mark, we expect our effective tax rate for the full year, excluding our Q2 goodwill impairment charge, to be approximately 44%-45%. Turning to Slide 17, our balance sheet remains strong. Cash and cash equivalents at September 30 increased slightly from the end of Q2 to $179.2 million. That's even with the repurchase of $37.6 million worth of shares during the quarter.
DSO for the quarter increased by one day to 72 days, but I would point out to several large receivables related to the ER work that should help us bring that down in the upcoming quarters. We continue to target DSO in the mid-60-day range. We brought environmental liabilities down below the $200 million mark for the first time since we bought the Chemical Services division of Safety-Kleen back in 2002. Environmental liabilities are down more than $9 million since the start of the year, as we continue to address our obligations at a number of sites and reduce our overall liability. Q3 CapEx, net of disposals, was $64.8 million, which is above the $57.8 million we spent in Q3 of last year. However, pardon me, this quarter includes $21 million invested in the El Dorado incinerator.
If you back that out, we are considerably lower than a year ago. For 2015, we are continuing to target CapEx of $200 million, excluding El Dorado, which we expect to add approximately $50-$55 million this year. Cash flow from operations was strong at $115.8 million, versus $81.1 million a year ago. For the full year, we expect to achieve cash flow from operations of approximately $400 million. Moving to guidance on Slide 18. Based on our year-end performance and where we see our markets today, we are revising our 2015 Adjusted EBITDA guidance. We now expect Adjusted EBITDA in the range of $507 million-$514 million, compared with our previous guidance of $530 million-$570 million.
In summary, a continuation of emergency response work helped us offset challenges caused primarily by the weak crude oil market. Industrial and Field Services and SK Environmental provided the bright spots for the company in Q3. The launch of Kleen Performance Products serves to unite our re-refining business under a single brand that is focused on growth opportunities in the lubricants market. We are headed into our 2016 internal budgeting process later this month, and as Alan said, we recognize the need to be proactive in the event that the challenges we face this year potentially become the norm in our markets for a protracted period. While we are not providing 2016 guidance at this time, our goal, as we enter budgeting, will be to meet or exceed this year's Adjusted EBITDA results in 2016.
The $100 million cost reduction program we announced today will be underlying our entire budgeting process. With that, Rob, could we please open up the call for questions?
Operator (participant)
Sure. If you'd like to ask a question, please press star one on your telephone keypad, and a confirmation tone will indicate your line's in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, and in order to allow as many as possible to ask questions, we ask you please to limit yourself to one question and one follow-up. You may then return to the queue for any additional questions if time permits. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Joe Box with KeyBank. Please go ahead with your questions.
Joe Box (Analyst)
Hey, good morning, guys.
Jim Rutledge (Vice Chairman, President, and CFO)
Morning.
Joe Box (Analyst)
So, Jim, I recognize that, you know, there's no formal 2016 guidance here, but if your goal is to achieve flat to up EBITDA in 2016, you know, recognizing that the ER business probably won't repeat and some of the businesses are likely to remain challenged, can you just walk us through, you know, what levers you expect to pull to get to that flat to up, you know, aside really from the $50 million of cost save that you expect to get next year?
Jim Rutledge (Vice Chairman, President, and CFO)
Well, certainly what we've seen this year in terms of delays in waste projects in our technical services business, we know from history that waste projects, the typical things that we do, like for example, in when we were at in the time of August, I was looking across the schedule and the pipeline of projects we were working on, and they numbered over 30. And many of them, most of them, have been pushed. So clearly, that had an impact when we were talking about our guidance this year. But we know from the past that those projects must be completed. Generally, those projects are being done with various government authorities and relate to good environmental practices that we know will come back.
So I suspect that we'll see some growth there, as well as with what had happened in the Kleen Performance Products business. If you recall this year, we had a loss in Q1 when we were initiating our zero PFO, but base oil had come down so much. We're not expecting anything like that because we've dropped now our—that has all been flushed through inventory, and now we're operating in a better spread and a more appropriate spread based upon all that has happened. I mean, base oils went down, as you know, 35%-40% just since last year, and hence, we needed to bring our PFO down, and it's down close to zero, as Alan mentioned in his comments. So things like that have differences that come into next year.
But clearly, that's all gonna be part of our budget process, and we're really going through all the cost savings and making sure that we're integrating those into the budget as well. So, I assure you that there are many growth levers if you compare some of the details of this year versus that, that won't be headwinds going forward. Energy, we're not counting on. As Alan pointed out, we think it could be protracted. We're not looking for any jump in crude price or having any of that. It's how we're managing the business that gives us confidence about that. So that is our goal.
Joe Box (Analyst)
Then just a follow-up question for you on the tech services business. I mean, you laid out, I think it was four or five headwinds that impacted the business in the quarter. Was there, you know, any one headwind that really drove the miss, or if you could just kind of bucket those for us? And then, you know, I know you're talking about a lot of these projects coming back, but I'm curious, you know, what's your conviction that this is a one quarter slip, or what's the likelihood that it, you know, drags into 2016? Because a lot of the areas that you highlighted seem like they could be, you know, with us for quite some time.
Jim Rutledge (Vice Chairman, President, and CFO)
Yeah, okay. Well, maybe you asked about tech, and maybe I'll just do a quick rundown of the businesses. If we look at technical services, I had mentioned before that waste projects clearly came in a lot less from what we expected, and with the active projects and the pushouts that we saw among our customers, the energy waste streams coming into the landfills have hurt us already. We're not looking at further reductions from that. But I would say that...
A third item that I would point out, and we're seeing this in the chemical industry, where clearly with the high value of the US dollar in the U.S. and exporting among our multinational customers and multinational companies in the chemical industry, clearly have been impacted by their production, and hence, they're producing lower waste streams. So that had some impact as well. So when you look at those three factors, was the main driver behind our reducing guidance coming into the Q3 and Q4 of this year. Now, last year, I would point out in Q4, it was the opposite trend. Waste streams into the energy business were very strong.
You saw a sequential increase from Q3 to Q4, a substantial increase due to energy-related waste streams, and you also saw a pickup of waste projects. Waste projects were very strong, so it was the exact opposite situation going from Q3 into Q4 last year, which originally we were anticipating based upon the schedule for this year, but that did not turn out. So when I look at tech, and I look at it in Q4 versus Q3, I see it more of a sequential normal seasonal decline, and maybe it's about $5 million in profitability when you go from Q3 to Q4. So those are the factors that I don't think are repeatable next year.
I do think waste projects will pick up, and we've already seen, I think, the bottom of the energy-related, and then we'll see how the overall economy goes with chemical industry. And then just very quickly, because the nature of your question, just talking about some of our key businesses. In industrial and field services, I would think that as we look for the rest of the, as we look at Q4 this year, I expect probably a 5% increase over last year. That's without any ER. We're pretty much done with that in Q4, and, and, but clearly, we're very busy with turnarounds right now, where we'll be winding down as we get into the holiday season, clearly, but that has been very busy, so I'm expecting a 5% increase year-over-year.
So good, healthy business, as Alan has been talking about in our industrial and field services business. In Kleen Performance Products, I do see, as I alluded to before, and Alan mentioned, a pickup going into Q4 because the two base oil price declines that we saw in Q3, clearly, our CFO program has not progressed far enough to offset that, but it will in Q4. So you will see a few million-dollar sequential increase there as we go into Q4. And then clearly, SK Environmental, with all of the cost savings, the volume of business that we're doing, the number of services we're doing with clients, and some pricing changes that we've made there, that should continue to see growth.
Sequentially, it will obviously be down due to seasonality, but year-over-year, I expect a 10% growth in profitability there in EBITDA. I'm talking about EBITDA, by the way, throughout here. And then lodging and oil and gas, that being said, we're, although there are certainly opportunities that Alan alluded to, expanding our drill camp program to get into other businesses and expanding our manufacturing to serve nontraditional markets, we next year, we'll see some pickups there, but we're not counting on the energy-related side. So there are some opportunities there. But when I go from Q3 to Q4, you know, we would say that we'll probably, in each of those businesses, maybe increase $1 million-$2 million in profitability in EBITDA. So, I expect.
And then the last thing, just to mention on corporate costs, just to look at where that is, we're expecting that corporate costs for the year, for the full year of 2015, will be in the $145 million range, which as, which as you know, is down considerably from 2014, when we were $161 million. So we're, we're proud of the reductions there. And, and now that our businesses are all on one system, there are a lot of cost savings that we can do from a general and administrative standpoint, that those system integrations will now allow us to do. So we, we continue, we believe we'll be able to decrease that even further going into next year.
Hopefully, Joe, that high rundown of the businesses helps both in terms of Q4 and what are good possibilities and confident possibilities for next year.
Joe Box (Analyst)
It is, Jim. Thank you for all the color on that. I'll turn it over.
Operator (participant)
Our next question comes from the line of Al Kaschalk with Wedbush. Please go ahead with your questions.
Al Kaschalk (SVP)
Good morning, guys.
Jim Rutledge (Vice Chairman, President, and CFO)
Morning.
Joe Box (Analyst)
Morning.
Al Kaschalk (SVP)
I wanna focus on two areas. First, on the cost takeout. You provided some general commentary. Is this more chunky in nature? In other words, there's gonna be a couple things to really accelerate this $50 million in 2016, such as maybe facilities or plants. I'm curious, just given the reduced volume, the acquisitions done, and the optimization of facilities, if you're finding that your network now maybe is too broad.
Alan McKim (Chairman and CEO)
Well, you know, certainly as the company has acquired, you know, 40 businesses in the last 25+ years, there are a number of assets, and the network is significant. We've got over 800 locations, and we have been evaluating all of our locations, both leased and owned. You know, well over 400 of those are leased, costing us in excess of $35 million, just in lease expense alone. So there is a lot of areas in our network, to your point, where we could consolidate into owned property and eliminate a lot of leased locations, and that has been well underway in design. There's no silver bullet, I think, Al, as far as your question about chunky or groups.
There are certainly, you know, dozens of cost buckets within our organization that are part of our cost reduction plan. And, you know, we'll be communicating those both internally and, you know, to you all as they progress. But we recognize based on where we're at and based on where we think oil is gonna be in at least in the next three years. And so I think we have to look at crude oil and base oil being where it's at for three years. So if we plan that, then anything in of an improvement will certainly be a benefit to all of us.
But we have to kind of reestablish the realities, because things have been moving in the energy space, as you know, very, very quickly, and it's been very difficult for everybody involved to keep up with the decline that's taken place here. So, we're working hard across the organization to recognize those changes need to take place, including the infrastructure that we operate from, as I mentioned, as well as a lot of other buckets of costs that need to be addressed. So, you know, we'll communicate that to you as quickly as we can.
Al Kaschalk (SVP)
Yep. No, I agree on the new reality, that's for sure. On the more constructive side of things, I was wondering if you could provide to the extent you can, given the strategic nature of it is. But one of the things we continue to look at is the blended sales program.
Alan McKim (Chairman and CEO)
Yep.
Al Kaschalk (SVP)
The pilot program that you're underway on the Kleen Performance Products.
Alan McKim (Chairman and CEO)
Yep.
Al Kaschalk (SVP)
Can you maybe talk, I don't know, broadly about it, like, where adoption is, where, where you're pushing harder, where you're getting success?
Alan McKim (Chairman and CEO)
Yeah, I think-
Al Kaschalk (SVP)
How we can look at that.
Alan McKim (Chairman and CEO)
You know, this year has been, you know, seeing a lot of movement in regard to our blended products. We certainly have had to shift a lot of our blended products away from where it was actually being sold to at the time, because we recognized from a pricing and profitability standpoint, it just wasn't making a lot of sense. We've had to go back and look at a lot of our contracts and a lot of our channels as we've talked about, I think, Alan, in the past, that. So we took a couple steps back to go step forward. So even though we're flat, I think we're focused on the right areas for that business today.
The opportunity to have customers who are generating hazardous waste oil to buy back our re-refined products, one of 70 different products that the company manufactures across a number of different brands, we believe is a successful strategy moving forward for our re-refined business. The selling our products as a commodity, particularly as a base oil, is something that we're not interested in continuing in the long term. So I would say that we've seen a lot of interest, particularly as you start introducing charges for customers in the field to collect their oil, and offering them alternative to also buy that same kind of product back, is a very, you know, welcome strategy, I believe, by a lot of the customers.
So we have 70,000 customers, and we feel we can get good traction with them in buying back our blended products, and we'll continue to update you on our success with that.
Al Kaschalk (SVP)
Thank you, and good luck.
Alan McKim (Chairman and CEO)
Yeah, thanks.
Al Kaschalk (SVP)
Thank you.
Operator (participant)
Our next question comes from the line of David Manthey with Robert W. Baird. Please go ahead with your question.
David Manthey (Senior Research Analyst)
Hi, good morning. Thank you. First off, on the $100 million in cost cuts, Jim, in your monologue, you had mentioned oil and gas costs that had already been reduced and clearly in response to the environment. And then, you also mentioned the corporate overhead costs being lower. I'm just wondering, are any of the benefits that you're seeing currently in the third quarter and then maybe some in the fourth quarter, a head start on this $100 million already, or is this totally separate from where we are in the third quarter?
Alan McKim (Chairman and CEO)
No, Dave, this is completely separate from where we're at and where we'll be for the rest of this year. This is a program that goes beyond what we've been working on, and as Alan gave some of the highlights, I did mention in the general and administrative area and our indirect, you know, our non-billable headcount, if you will, that we'll see some reductions there. We will see office consolidations. We'll see reduced fees, whether they be contractor fees, whether they be professional consulting along those lines, systems consulting included, reduced travel-related expenses, and the like. So it's a completely new program.
David Manthey (Senior Research Analyst)
Okay. And as it relates to these, the cost reduction efforts, by our math, I think you've announced, you just announced, cost reduction plans of about $375 million since you acquired Safety-Kleen back in 2012. And this round, you know, in terms of lower G&A and facilities and, and, that sort of thing, it sounds like these are longer term and maybe, you know, bigger moves rather than just cutting around the edges. Number one, are you reaching the end of the line on, on what you can cut? And then second, I'm hoping you can outline what are operational efficiencies. Those, those don't really sound like a cost cut, but can you describe what those are?
Alan McKim (Chairman and CEO)
Yeah, I'll take a stab at it. So I would tell you that, as we look at where we've been since we first started working with Safety-Kleen back at the beginning of 2012, you know, base oil in itself is down well over $2, in fact, about $2.30 a gallon. That equates to about $270 million of essentially EBITDA loss for the business. So when we look at that $350 million dollar number that you talked about, we're talking about reductions in PFO costs, you know, which is part of our operating costs. You know, we've taken out a lot of overhead. Our non-billable staff is about 4,000 right now.
That was close to 4,700, and that included several acquisitions that were made during that same period of time. So about 1,000 less non-billable staff in the company. The team really has worked extremely hard to reduce costs and the headwinds that we have felt since the acquisition of Safety-Kleen, which is coming up on three years. And so you know, as Jim mentioned, getting everybody on the same platform, we've eliminated huge amounts of IT costs and systems costs, and you know, those unfortunately you know are not showing up in our EBITDA numbers per se, but I would hate to see what the business would look like if we didn't take all the actions that we've taken in light of the decline that we've seen across our business with the impacts of oil.
David Manthey (Senior Research Analyst)
Okay, and that, that number you mentioned, that EBITDA impact, is a gross number based on, the decline in base oil, doesn't include your reduction in, PFO?
Alan McKim (Chairman and CEO)
That's right. That's right. So, you know, to offset that, you know, we've had to reduce PFO costs to offset that. But, you know, when you start thinking about where's that cost reduction number, I don't know all the numbers that are part of your $350 million number that you mentioned, but all I can tell you is that, you know, reducing our PFO was probably $200 million of that, you know, at this point. So we had a...
You know, we've, we've had to change the market, and, that, that has taken a tremendous amount of effort, to move from charging customers well over or paying customers well over $1 a gallon when base oil was at $4.35 a gallon, to be able to go-- sit across from a customer and start charging now for that same oil, because base oil is only worth $2.05 a gallon. And, and so we, we, you know, that's part of that cost reduction, Dave.
David Manthey (Senior Research Analyst)
Okay. So, a part of the $100 million is, is charged for oil in 2016 as opposed to pay for oil in 2016?
Alan McKim (Chairman and CEO)
No, I don't think so.
David Manthey (Senior Research Analyst)
Hundred-
Alan McKim (Chairman and CEO)
That's— you know, when we look at our PFO cost is essentially at zero right now. We're the $100 million that we're talking about is not PFO related.
David Manthey (Senior Research Analyst)
That's right.
Alan McKim (Chairman and CEO)
So that's unrelated. There, you know, we'll certainly be reducing outside transportation by expanding our rail. We just added 500 more rail cars, so we have a lot of opportunity to internalize a lot more movement of our oil and eliminate a lot of over-the-road transportation, which saves us, you know, a lot of money. We've just converted about 400 rail cars to jumbo rail cars, which has increased our capacity considerably. So there's a lot of things that are coming in this quarter, which will start showing up next year. But, you know, those are the kinds of things, not-- this is not a PFO number that's we're talking about here.
David Manthey (Senior Research Analyst)
Sure. Okay. All right. Thank you very much.
Alan McKim (Chairman and CEO)
Thank you, Dave.
Operator (participant)
Our next question is from the line of Michael Hoffman with Stifel. Please go ahead with your questions.
Michael Hoffman (Managing Director)
Thank you very much for taking my questions, Alan and Jim. We at the Analyst Day a little while ago, one of the things you talked about, and there's two line items that you particularly focused on, and it was sort of a three to five-year view. Adjusted EBITDA margins would get to 20%, and free cash flow would be at $300 million. Can we talk about how you view that today, given your commentary that we should assume the, the, that we're lower for longer commodity pressures on the overall business model?
Jim Rutledge (Vice Chairman, President, and CFO)
Well, I'll start. This is Jim, and if Alan wants to add anything. Clearly, when we were doing the Analyst Day was before the precipitous decline in the energy markets. So I think we're at a new level now, and depending upon what economist you talk to, there's several views out there that think there is a cycle here, and that maybe in a couple of years you'll see more stability and perhaps an increase. But in any event, there's a new norm, and when we were holding that, the energy markets were a lot more different. We were a lot different. We were at the front end of a lot of the opportunity in the U.S. with what was going on in energy.
So I think setting that aside, but recognizing with Safety-Kleen, as Alan talked about, all of the integration that's been done and the strategic moves that we've made in terms of Kleen Performance Products and kind of centralizing that whole oil collection and direct sales channels and all that has an impact, that we are confident that we could get closer to that goal. But without energy markets, within that timeframe that we talked about, without energy markets becoming more stable, I think across all of our businesses, it's affecting everyone. It's affecting industry overall. I think it's gonna be tough to be at a $300 million cash flow in the next couple of years. But I do believe we're gonna come close.
I mean, our free cash flow is about half that this year. We figure it'll be about $150 million or so. So I think that we're in a good situation from free cash flow, despite all that has happened. I mean, despite the huge numbers that Alan just talked about, of nearly $300 million impact on our EBITDA from some of the energy things that have gone on. So I think the resiliency of our business to be able to withstand that is good, and I think even today, we're at half of what that goal said we would be.
Alan McKim (Chairman and CEO)
Yeah, I don't think-
Jim Rutledge (Vice Chairman, President, and CFO)
We haven't given up yet.
Alan McKim (Chairman and CEO)
Certainly, I don't think if you look back, Michael, at where we were at, you know, during those meetings and look at the hundreds of billions of dollars of spending cuts that have been announced by the top 100 customers of ours. I mean, shutting down production, shutting plants down, ceasing investment, demanding price declines, you know, to address what is going on in their business. So this has been, I think, unprecedented. I think people, you know, go back to the 1990s, excuse me, the 1982 or 1973 time frame. I mean, this is really unprecedented times that is spilling over across our business.
You know, I think the team has done an incredible job to deliver, you know, $500+ million of EBITDA this year, last year, and continuing to drive, you know, kind of the initiatives to be a profitable business here in light of, you know, the huge headwinds that this company has faced and our customers are facing.
Michael Hoffman (Managing Director)
Okay, granted, if you do $150 in free cash this year, and I'd like to tease that out a little bit, that was the sort of original guidance. I mean, at the end of the day, all things being equal, follow the cash when everything else is burning down around you. If you're at $150 this year, and you achieve the cost saves you're talking about next year, there's clearly growth in that. Then I take El Dorado out because it's done.
Alan McKim (Chairman and CEO)
Yep.
Michael Hoffman (Managing Director)
I mean, that's the path. Is that... But you're standing by the $150 million? Because that means you'll do $30 million in free cash in the fourth quarter. You're at $120 million year to date.
Jim Rutledge (Vice Chairman, President, and CFO)
Yeah, I think, I think if you look at some of the collections that we're doing in AR related to the ER work, and the reduced CapEx as, as we've talked about, I think, yes, that's doable.
Michael Hoffman (Managing Director)
Okay.
Jim Rutledge (Vice Chairman, President, and CFO)
You do bring to light the opportunities going forward. I mean, you definitely do, because you're right, we won't have the spending. After next year, we will not have that roughly $50-$60 million spend that we'll have this year and next year on El Dorado. So our CapEx will be down substantially, which will affect... That's a, that's a boost of $50-$60 million. So that's a very good, good point, that the year after next, you should see a nice boost in free cash flow. So maybe we're not so far off our goal. It just might take another year or two.
Michael Hoffman (Managing Director)
Yeah, I mean, at the end of the day, stocks discount future free cash flows, and Clean Harbors was a good cash generator from sort of 2000 to 2010, and it was kind of an ugly cash generator from 2010 to about last year, and then you started correcting that. What I'm trying to understand is, can this be that quality cash generator it was when the stock was a great stock to own from 2000 to 2010? And what I'm hearing-
Jim Rutledge (Vice Chairman, President, and CFO)
Absolutely.
Alan McKim (Chairman and CEO)
Absolutely. Yeah. I think the company knows how to manage its cost, and, you know, we've committed to really focusing on our ROIC and improving our returns and really taking a much closer look at all of our capital investments, which is, you know, something that drove that CapEx down considerably this year from a year ago. And we'll continue to manage that tightly going forward, especially in light of, you know, what we've seen in the energy space.
Michael Hoffman (Managing Director)
So Alan, you have a rare perspective on a lot of what goes on in your end markets, being at this for 35 years. Do you think we're in an industrial economy recession or just a resetting to a longer term low growth rate?
Alan McKim (Chairman and CEO)
I think the industrial is certainly in a recession from everything. You know, we would've thought with natural gas at $2 or $2.20 with, you know, all the things that we had seen over the last two or three years of investment going into building new chemical plants, and, you know, we would have seen a lot more out of the industrials than we're seeing. And, you know, whether it's the strong dollar or the weak global economy that's hurting the industrials, but clearly, on the waste side, we have seen that. But I don't think there are many businesses out there, you know, that we service that haven't had some impact on energy.
Michael Hoffman (Managing Director)
Okay.
Alan McKim (Chairman and CEO)
So they have curtailed their spending. I mean, they have held back on capital. They are doing everything they can to shrink their spending. So all of that has had an impact, I think, across the board. Whether you're talking about refining or chemical or oil and gas or, you know, some of the other big manufacturing companies out there, clearly, I think, that's what we're seeing.
Michael Hoffman (Managing Director)
Okay. And then one last one for me. One of the things that the company's had a challenge with, I - and you mentioned it, is this base oil was over $4, and it's now at $2. Can you frame in this last nine months, the, some of the things that are different about how you've been running it, that show how you've managed that trend? So and I don't - I'm not asking you absolute numbers because it's a competitive issue.
Alan McKim (Chairman and CEO)
Yep.
Michael Hoffman (Managing Director)
What's the trend year to date on the base oil versus your cost of goods sold of oil delivered to the plant, at landed cost, so we understand how well you are, in fact, driving the control over that spread?
Alan McKim (Chairman and CEO)
Yeah. I think we have the data today, the economic models and the data, and we've built the tools so that in every location we're in, let's say 190 locations, we know what our cost is to deliver to one of our three refineries and in 50 different terminals. And so I think we have a better handle than ever before that Safety-Kleen has, and they're a 50-year-old company. We have better handle on not only what our costs are, but what are the competitive outlets in a particular market as it relates to RFO. The one thing that we continually see is with price of natural gas being where it's at and where we think it's gonna continue, the outlets for recycled fuel oil continue to shrink.
The need and the demand to have hazardous waste oil re-refined and recycled to be reused will continue to grow. The specifications on what oil has to be to be used as a marine diesel oil, or another kind of, you know, VGO, it continues to tighten. And so we're in the right place, and we just gotta deal through the issues we're dealing through right now.
Michael Hoffman (Managing Director)
Okay, I get that, but can you share, I mean, on a year-over-year basis, is your fully landed cost to your plants down, I'm making a number up, 60, and the base oil price is down 70, and you're gonna fix that by this CFO move, and that spread revert? I mean, I'm trying to understand that.
Alan McKim (Chairman and CEO)
You know, I would tell you, and you know, two years ago, we would've had on the as an expense, well over $200 million for oil. Today, that would be under $20 million. Then you have to look at the, you know, the transportation cost of moving product, the processing and the handling costs, you know, all the other costs. So, you know, it's sort of a complicated question, Michael, but I would just tell you that the delivered cost, we have had to work our tails off here to address every single aspect of it, from charging customers to reducing our cost of transport and doing everything in between, including running these plants much more efficiently to be able to deal with the decline that we've seen here.
Michael Hoffman (Managing Director)
Got one last thread on that.
Alan McKim (Chairman and CEO)
Yep.
Michael Hoffman (Managing Director)
Don't you have, going into 2016, a whole bunch of national account contracts expire, which gives you another point of leverage on that 200-20 number?
Alan McKim (Chairman and CEO)
You know, I'd be guessing to answer that one. I don't know specifically. You know, we've got hundreds and hundreds of accounts, so, and national accounts, I'd be guessing, Michael.
Michael Hoffman (Managing Director)
Okay.
Alan McKim (Chairman and CEO)
You know, I think you got the message that, you know, I've visited a lot of accounts and talked to them personally about the challenges and showed them the graphs and explained to them where we are. The only difficulty I think people have is that it was 10 years ago when the majority of customers were being charged for oil. And so they forgot that this is a business that historically you would charge because you're performing a service. But when the value of the oil got up to $135 or $140 a barrel, it really changed the market, and the industry did not move fast enough back to charge for oil.
I believe we are providing that leadership and communication back to our customer to make that happen like it was 10 years ago.
Michael Hoffman (Managing Director)
Fair enough. Thank you.
Alan McKim (Chairman and CEO)
Thank you, Michael.
Operator (participant)
Our next question is from the line of Tyler Brown with Raymond James. Please proceed with your questions.
Tyler Brown (Associate VP)
Hey, good morning, guys.
Alan McKim (Chairman and CEO)
Good morning, Tyler.
Tyler Brown (Associate VP)
Hey, I just, Jim, I wanna come back to SG&A. So it looks like it was the lowest nominal level, kind of in years, at $93 million this quarter. And I think you noted incentive comp. Was there a reversal in the quarter?
Jim Rutledge (Vice Chairman, President, and CFO)
We had, if the reduction year-over-year was something like $5 million or somewhere around that on incentive comp.
Tyler Brown (Associate VP)
Okay, perfect. And then I just wanna be clear, on the $100 million of reduction in expense, these are all operating expenses, it's not capital reductions?
Jim Rutledge (Vice Chairman, President, and CFO)
That's right. Now, these are-
Tyler Brown (Associate VP)
Okay
Jim Rutledge (Vice Chairman, President, and CFO)
... these are savings that hit the P&L.
Tyler Brown (Associate VP)
Okay, perfect. And then-
Jim Rutledge (Vice Chairman, President, and CFO)
I mean, there are in tandem with that, there are asset sales and things like that, that will spin out as a result of this. So they'll obviously, when you're consolidating locations, there'll be opportunities to gain capital, but that's not the $100 million is P&L, what we're talking about.
Tyler Brown (Associate VP)
Okay, well, I do wanna come back to CapEx for a second. So you know, you guys are talking about $200 million in CapEx, ex El Dorado. But I'm curious, like, how much of that $200 million is specifically designated in oil and gas and lodging?
Alan McKim (Chairman and CEO)
Oh, small. Yeah, maintenance is... How much of the 200, Jim, what, what is the maintenance number that we keep the-
Jim Rutledge (Vice Chairman, President, and CFO)
Yeah, for the overall company, it's $140 million-$150 million of maintenance just to keep things going.
Alan McKim (Chairman and CEO)
Yeah.
Jim Rutledge (Vice Chairman, President, and CFO)
And then-
Tyler Brown (Associate VP)
Right
Jim Rutledge (Vice Chairman, President, and CFO)
... growth CapEx, there's
Alan McKim (Chairman and CEO)
Yeah
Jim Rutledge (Vice Chairman, President, and CFO)
... virtually, there's almost nothing for the.
Alan McKim (Chairman and CEO)
Yeah
Jim Rutledge (Vice Chairman, President, and CFO)
... the businesses in the carve-out right now.
Alan McKim (Chairman and CEO)
Yeah, we're repositioning a lot of oil and gas-related assets into the business, moving centrifuges into our industrial business.
Jim Rutledge (Vice Chairman, President, and CFO)
Yeah.
Alan McKim (Chairman and CEO)
We really are not spending capital in the oil and gas, but we are maintaining those assets and making sure that, you know, these are, you know, not losing their value.
Jim Rutledge (Vice Chairman, President, and CFO)
Right.
Tyler Brown (Associate VP)
Oh, okay. So, I totally appreciate that. So when we look to next year, I mean, we've got incinerator utilization at 19%. You've got oil and gas equipment utilization at 38. I mean, why wouldn't we see CapEx, excluding El Dorado, come down next year?
Jim Rutledge (Vice Chairman, President, and CFO)
I think, you know, we originally set out a goal to be able to have our CapEx to be at the $200 and below $200 over the next few years. We're achieving that now, so we've done a lot of cutting already, Tyler. Now, there will be more. I'm as part of this budget process, clearly an underpinning to a budget process is also what is the capital plans by business. So I wouldn't commit at this point to say that we would have a decline, but I think you have a point that if we have cut that out, we don't intend to put growth CapEx into energy with the way things are right now, perhaps we could see a reduction, ex El Dorado.
But right now, I just can't commit to a number, but I think you raise a good point.
Alan McKim (Chairman and CEO)
But I think-
Tyler Brown (Associate VP)
Okay, no.
Alan McKim (Chairman and CEO)
But I think we're trying to get to a number south of 200-
Jim Rutledge (Vice Chairman, President, and CFO)
Absolutely.
Alan McKim (Chairman and CEO)
On a net basis. So we realize that by consolidating locations, in some cases, you know, owned properties even, that on a net basis, you know, we can generate quite a bit of cash by executing on our plan here.
Jim Rutledge (Vice Chairman, President, and CFO)
That's a great point, Alan, because I was talking gross. So but if it's clearly the point we talked about before of asset sales, that's right. That will net it down.
Tyler Brown (Associate VP)
Okay, perfect. And then, Jim, just thanks for the detail on the realized cost saves in 2016. But should we assume that that is gonna be more back half-weighted, or are these actions gonna be taken fairly swiftly? And then are you gonna see any major severance outflows in terms of next year's cash flow?
Jim Rutledge (Vice Chairman, President, and CFO)
There will be some, yes. The way I would characterize it is we're looking at a run rate of $50 million, so we're anticipating that it is something that will flow through the year, so that we would be at the run rate of $100 million by the end of the year. So right now, that's our best estimate, that $50 million will be captured next year, so-
Tyler Brown (Associate VP)
Okay, so you can get to the run rate, $100 million run rate by the end of the year?
Jim Rutledge (Vice Chairman, President, and CFO)
Oh, absolutely.
Tyler Brown (Associate VP)
Okay.
Jim Rutledge (Vice Chairman, President, and CFO)
By the end of 2016. Yes.
Tyler Brown (Associate VP)
Okay, perfect.
Jim Rutledge (Vice Chairman, President, and CFO)
Yep.
Tyler Brown (Associate VP)
Thanks, guys.
Jim Rutledge (Vice Chairman, President, and CFO)
Excellent. Thank you, Tyler.
Operator (participant)
Our next question is from the line of Scott Levine with Imperial Capital. Please go ahead with your question.
Scott Levine (SVP and Equity Research Analyst)
Hey, good morning, guys.
Jim Rutledge (Vice Chairman, President, and CFO)
Good morning, Scott.
Alan McKim (Chairman and CEO)
Morning.
Scott Levine (SVP and Equity Research Analyst)
I wanna focus, I wanna come back to technical services. So, you know, it, it seems like that was, you know, certainly below expectations. You referenced, on the one hand, lower volume tied to energy and industrial, and on the other hand, waste and waste project delays, which seem like they're not cyclical in nature, but more timing. You referenced, I think, government projects and otherwise, and also a 28% decline year-over-year in landfill tonnage. How much of the downside in, versus what you guys were expecting or what you're seeing, would you consider to be cyclical versus delays? And could you elaborate on the delays and conviction level that those delays, that delayed volume effectively comes back at some point in the future?
Jim Rutledge (Vice Chairman, President, and CFO)
I'll start that, and if Alan wants to add anything.
Alan McKim (Chairman and CEO)
Yeah.
Jim Rutledge (Vice Chairman, President, and CFO)
But one of the things that we've seen in waste projects is there is some cyclicality to it. Clearly, as I mentioned, there's government involvement and all that. But if there is an area that you could hold up on, it is some of these projects. It's not like there is a latitude. It's not a month to month or quarter to quarter. It's more, you know, half year to a year, where you could delay. If you're in a low cyclical period, if you wanna stretch some of those projects, you can. The key that I was trying to bring up is that you eventually have to get to it. Like, I'll give you one example, just a high-level color here.
When we had the recession in 2009, we suffered, just like everyone else, the technical services came down with the lower industrial production that was going on, and we also saw some waste projects being drawn out. In 2010, the year after, if you look at technical services, they went up, like, 20%-25% because there's a backlog, a backlog from that. Now, I'm not saying that now is anything like 2009, but there is a softness in industrial, given, you know, in the multinational area, where due to the high US dollar and some of the factors that we mentioned before, that there is a softness, that we are seeing some stretching.
So there is a little. I just wanted to correct that one point, because there is some cyclicality here that we are talking about.
Scott Levine (SVP and Equity Research Analyst)
Got it.
Jim Rutledge (Vice Chairman, President, and CFO)
Does that help, Scott? Did I completely answer your question or, or no?
Scott Levine (SVP and Equity Research Analyst)
Yeah. No, I mean, I guess, I guess, the follow-on thought would be, what portion, I don't know if this is an, you know, answerable, you know, with a point projection or estimate, but what portion of call it, the downside and what you're seeing in tech services, you know, do you think is delayed that likely comes back in 2016 versus, you know, is more cyclical nature, not delayed, and is frankly gone for good?
Jim Rutledge (Vice Chairman, President, and CFO)
I would say anywhere from a half to two-thirds, from a very high level.
Scott Levine (SVP and Equity Research Analyst)
Yeah.
Jim Rutledge (Vice Chairman, President, and CFO)
Just given waste projects, and certainly any pickup in the economy would help with this, and industrial softness that we're seeing out there right now. But even with waste, oil and gas waste and drill cuttings and all that, just staying flat, just not-
Alan McKim (Chairman and CEO)
Yeah
Jim Rutledge (Vice Chairman, President, and CFO)
... moving anymore, I would say probably two-thirds.
Alan McKim (Chairman and CEO)
Yeah. I don't think we should miss the point, though, about our tech service is extremely strong with our drum business-
Jim Rutledge (Vice Chairman, President, and CFO)
Absolutely
Alan McKim (Chairman and CEO)
... our utilization of our incineration facilities, the volumes of waste that Safety-Kleen continues to generate from their small quantity generator customer base. Those 200,000 customers has been growing.
Jim Rutledge (Vice Chairman, President, and CFO)
They're domestic.
Alan McKim (Chairman and CEO)
And that's all here in North America. So I would say that, you know, we're looking at, you know, remnants of some of the slowdown that we saw. Some of it got to do with the strike that we saw in both the refinery side, as well as the longshoreman strike that impacted-
Scott Levine (SVP and Equity Research Analyst)
Right.
Alan McKim (Chairman and CEO)
-a number of our customers this year. So, you know, we see a little bit of that remnants. But, you know, when you look at some of our verticals, our healthcare, some of our, you know, other industries that we service, you know, those are doing pretty well.
Scott Levine (SVP and Equity Research Analyst)
Very sure.
Alan McKim (Chairman and CEO)
We expect that and retail to do very well next year. So, although we're talking about, you know, somewhat a reduction, particularly related to the 11 landfills we have, the rest of that business, our CleanPack business, our drum business, is very strong right now. Yep.
Scott Levine (SVP and Equity Research Analyst)
Got it. Great. Call's running a little bit long. I'll leave it there and turn it over. Thanks.
Alan McKim (Chairman and CEO)
Thanks, Scott.
Operator (participant)
Thank you. Our final question is from the line of Barbara Noverini with Morningstar. Please proceed with your questions.
Barbara Noverini (Director and Head of Investor Relations)
Hey, good morning, everybody.
Alan McKim (Chairman and CEO)
Good morning.
Barbara Noverini (Director and Head of Investor Relations)
Throughout this earnings cycle, a number of companies offering industrial field services commented on the heightened competition for work. Can you comment a bit on project pricing dynamics, and whether you agree that competition has intensified in any particular type of field or industrial cleanup work that you offer through your field services segment?
Alan McKim (Chairman and CEO)
I would say that not so much on our field services or industrial segment as it would be in our oil and gas side, you know, our field business and the oil and gas side of the business, where irrational pricing has taken place. You know, a number of people in that space. Let's face it, I think the drill count has gone from 2,500, maybe down to, you know, 500 or 600. I mean, it's just an amazing decline. And as you can imagine, all the service companies that were out performing everything from fluids hauling to, you know, frac tank rentals, everything that's going around the rig, those assets are sitting, and so we've seen irrational pricing.
It's one of the reasons why our equipment is sitting and why our utilization is low, and that includes lodging, by the way. We've kind of chosen that we're not gonna wear out all our equipment for nothing and give it away, and realizing that we're gonna have competition that's gonna put themselves out of business. You know, we're gonna be, I think, well positioned when that cycle happens, and that's been our strategy, particularly in the oil and gas field services. But as it relates to the field services industrial, I don't think we would say that that kind of pricing pressure has been the same.
Barbara Noverini (Director and Head of Investor Relations)
Got it. And then, even on those, you know, like you've had a great quarter for emergency services work in that segment, this past quarter, and also, you know, over the past year.
Alan McKim (Chairman and CEO)
Yeah.
Barbara Noverini (Director and Head of Investor Relations)
And pricing for those types of projects has remained relatively stable or as you expected throughout the year?
Alan McKim (Chairman and CEO)
Yeah, I would say, you know, some of the emergencies, one of the emergencies we did here was bigger than our large Gulf event we did back five years ago. And so it was a great event. But I think more importantly, we partnered with a lot of other companies around the network. And we continue to work with firms as other emergencies happen, and partner with them on if they're the lead on those types of events. So our... You know, we don't look at our emergency response as sort of a one-time. It is part of our business. We handle, you know, anywhere between 25 and more emergencies every single day. It's the nature of what we do.
But on, you know, when these large events happen, we are typically the company that gets called, or we're participating in some way, and I haven't seen any price decline in that area at all.
Barbara Noverini (Director and Head of Investor Relations)
Got it. Okay, thanks very much.
Alan McKim (Chairman and CEO)
Thanks.
Operator (participant)
Thank you. At this time, I'll turn the floor back to management for closing comments.
Alan McKim (Chairman and CEO)
Okay, great. Thanks for joining us. We appreciate your time and your questions, certainly. I know, Jim Rutledge and Jim Buckley will be presenting at the Baird Conference next week. Hopefully, we'll be seeing many of you there, as well as some of the other events. So, thanks again for participating today.
Operator (participant)
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.