Earnings Call: Q2 2020

Aug 5, 2020

Greetings. Welcome to Clean Harbors Second Quarter 2020 Conference Call. At this time, all participants will be in a listen only mode. A brief question and answer session will follow the formal presentation. Please note that this conference is being recorded. At this time, I'll turn the conference over to Michael McDonald, General Counsel for Clean Harbors. Thank you, Mr. McDonald. You may now begin. Thank you, Rob, and good morning, everyone. With me on today's call are Chairman, President and Chief Executive Officer, Alan S. McKim EVP and Chief Financial Officer, Mike Battles and SVP of Investor Relations, Jim Buckley. Slides for today's call are posted on our website, and we invite you to follow along. 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 today, August 5, 2020. Information on potential factors and risks that could affect our actual results of operations is included in our SEC filings. The company undertakes no obligation to revise or publicly release the results of any revision to the statements made in today's call other than through filings made concerning this reporting period. In addition, 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. Reconciliations of non GAAP measures to the most directly comparable GAAP measures are available in today's news release, on our website and in the appendix of today's presentation. And now I'd like to turn the call over to our CEO, Alan McKim. Alan? Thanks, Michael. Good morning, everyone, and thank you for joining us. Before discussing our results, let me take this opportunity to publicly thank our entire Clean Harbors team, particularly those on the front lines for their outstanding work throughout the pandemic. Our Q2 performance underscores the versatility of our business model and our leadership role in emergency response. Responding to crisis is an integral part of the job here at Clean Harbors. It's in our DNA, and that ability enabled us to jump into action late in Q1 and into Q2 with a wide ranging response plan. It began with setting strict safety protocols and gathering the proper equipment to protect our workforce. When successfully at staying safe, the infection rate among our workforce remains well below the per capita rates of the U. S. And Canada. Now let's turn to our high level overview for our Q2 results here on Slide 3. In response to the recessionary environment caused by COVID-nineteen, we implemented a comprehensive series of actions that included implementing a hiring, wage and travel freeze, temporarily closing nearly half our re refining capacity, transitioning the majority of our non field based employees to work from home, lowering our capital spending, reducing our overall cost structure to align with revenues, launching our COVID-nineteen emergency response service offering. On the strength of these actions and improving market conditions since we spoke with you in late April, we delivered a better than expected performance in Q2. Revenues came in at $710,000,000 down 18% from prior year, with the bulk of that decline in our Safety Kleen segment. Our adjusted EBITDA was $135,500,000 for the quarter, which included a total of $23,400,000 from the CARES Act here in the U. S. And the Canadian Emergency Wage Subsidy or CUES. These programs enabled us to employ more workers these programs enabled us to employ more workers than we would have otherwise been able to with the pandemic related shutdowns. Looking at our segment results beginning on Slide 4. Environmental Services revenues declined 12% from a year ago due to the COVID related slowdown across multiple lines of business, partly offset by incineration and decontamination work. Adjusted EBITDA grew 17% as a result of our cost reduction efforts, a strong performance in our facilities, emergency response revenue and the 2 government programs, which accounted for $13,300,000 in this segment. Emergency response work, whose margins tend to be above the corporate average, totaled $50,000,000 in the quarter. Our incineration utilization increased to 87% due to our healthy backlog coming into the quarter and steady streams from chemical customers. Our mix of higher value waste enabled us to drive our average price per pound up 6% from Q2 of last year. Our landfill volumes were down 24% due to the deferral of some remediation and waste projects. But our base business remains stable, which drove our average price Given expected investor interest, on Slide 5, we wanted to provide some additional details around our COVID-nineteen response work. As of June 30, we generated $60,000,000 in revenue related to the virus. As of today, we are now at more than Our jobs have varied from as small as an armored vehicle clean out to as large as a NASCAR track. We anticipate that demand for our services will eventually subside over time, but we do anticipate over $100,000,000 of COVID work in 2020. Moving to Slide 6, Safety Kleen revenue was down 30% due to a slowdown in both the branch and the SK Oil businesses due to customer shutdowns, the reduced demand for our core offerings, as well as the drop in base oil demand and lower pricing. Adjusted EBITDA declined 41% due to the lower revenue, pricing for our SK oil products and costs associated with the temporary shuttering of our re refineries, partly offset by cost reduction efforts and government assistance programs, which totaled $8,300,000 for this segment in Q2. Potts washer services were off 11% for the quarter and we collected 43,000,000 gallons of waste oil, about 2 thirds of our normal rate. Given where we were at the end of April, we're pleased to see this segment bounce back over the course of the quarter. Blended products and direct volumes on a percentage basis were in line with last year, but at a lower overall volume. Most recently, demand for base oil has recovered some to the point that we restarted our Kansas and Nevada refineries in July. The value of our base oil and blended products recovered somewhat over the course of Q2. However, with crude prices holding stable and vehicle miles driven remaining below traditional levels, we are proceeding cautiously before reopening any additional refineries. There may be pressure on pricing again in the back half of the year as supply and lubricant demand go further out of balance. And as a result, we'll be continuously continuing to aggressively manage our charge for oil program. Turning to capital allocation on Slide 7. Given the current environment, our strategy remains to focus on preserving cash to ensure we exit the pandemic in the best possible position. As we highlighted on our last call, we're carefully controlling our CapEx spend here in 2020 and expect to be well below last year's level. In terms of M and A and divestitures, we're not likely to be active on a near term basis. That said, we are confident that we will emerge from this downturn in a in a stronger financial position and operational position than some of our peers, which will allow us to be opportunistic. In terms of our debt, we repaid half of the $150,000,000 that we tapped on our revolver in Q2. And in late July, we repaid the other half, given our healthy cash position and how the company has performed. Looking ahead to the remainder of 2020, we believe we have positioned ourselves well for the current economic environment. Within multiple parts of our business, we've seen a measurable recovery from the lows we experienced in April. Within Environmental Services, our facilities network is still seeing a steady flow of waste volumes. We have not seen any meaningful decline for most of our large quantity generators. However, individual product delays due to the virus remain common and we've seen slower production with some chemical customers. While that may limit our high margin volumes in the coming months, we anticipate areas like our industrial services and others to ramp up in the back half of the year as maintenance and disposal work can only be deferred for so long. Within Safety Kleen, we entered Q3 on a positive trajectory with the summer driving season increasing demand for our services, but we will still remain below prior year levels. We are monitoring the new shelter in place mandates closely, but to date, the recent rise in COVID cases has not derailed the recovery in the SK branch business. For SK Oil, we're raising our production volumes with restarted plants now online. We'll continue to active manage our CFO rates to reflect the value of the waste oil and the collection services that we are providing. In summary, our Q2 results demonstrated the resiliency of our business model, our crisis management capabilities and our frontline role in COVID decontamination. Despite the economic uncertainties that remain, the actions that we've taken in response to the pandemic and our market leadership gives us confidence that we can achieve our 2020 targets. So with that, let me turn it over to Mike Battles. Mike? Thank you, Alan, and good morning, everyone. Let me mirror Alan's comments about how effectively our organization responded to the pandemic. The work of our outstanding team is reflected in the results we are sharing with you today. In these unprecedented times, the Clean Harbors team stood up for the challenges presented by this crisis. Personally, I couldn't be more proud of our organization. Turning to Slide 9 in our income statement. We delivered strong Q2 results in light of the pandemic. Revenue declined 18% and we aggressively managed the cost structure of the business in response to the slowdown. Those efforts combined with the assistance we received from the 2 government programs resulted in a 2 20 basis point improvement in gross margin. As Alan highlighted, our EBITDA declined less than $15,000,000 from a year ago despite revenues being $159,000,000 lower. Our adjusted EBITDA margin for the quarter was 19.1%, which speaks to how effectively we reduced costs, managed over time, closed the refineries and locations and furloughed workers as needed. SG and A performance also demonstrates our comprehensive cost reduction efforts. Despite the fact that employee benefits, including 401 are up significantly from a year ago, we lowered our SG and A expense by 20,100,000 dollars Of that total, dollars 9,100,000 was related to the impact of CARES and CUES. We flexed down our cost structure rapidly in the quarter, drastically cutting spending drastically cutting our spend in multiple areas such as travel and marketing. We also benefited from meaningfully lower health care costs in the quarter, which helped offset some severance and bad debt expense. As expected, depreciation and amortization in Q2 was down slightly to 72,500,000 dollars With only one small bolt on acquisition in the trailing 12 months, we should continue to see this trend going forward. For 2020, we expect depreciation and amortization in the range of $285,000,000 to $295,000,000 which is slightly below last year. Income from operations was $60,200,000 down 18%, reflecting the lower revenue and gross profit. EPS was $0.52 in Q2 versus $0.65 a year ago. Turning to slide 10. We emerged from the 2nd quarter with our balance sheet in terrific shape. Our cash and short term marketable securities exceeds $500,000,000 at June 30. That total includes $75,000,000 of funds still drawn on our revolver that Alan referenced. The entire $150,000,000 which we borrowed out of the abundance of caution when the pandemic began has now been fully repaid. Given the COVID environment, our collection team keeps cash coming in the door from customers and our payables balance has shrunk with the lower revenue and associated costs. After the full pay down of our revolver, our current and long term debt obligations today sit at $1,560,000,000 dollars Our weighted average cost of debt remains at an attractive 4% with a healthy blend of fixed and variable debt. We actually lowered our leverage in Q2 from where it was at in Q1. Leverage on a net debt basis now sits at 2.1 times for the trailing 12 months ended June 30, which puts us in an excellent position financially. Our net debt to EBITDA ratio is down over 15% from a year ago. Turning to cash flows on slide 11. Cash from operations in Q2 was up 29% to $139,800,000 CapEx net of disposals was down 25% to $42,000,000 reflecting our COVID response plan to preserve capital. The result was an adjusted free cash flow of $98,100,000 which is well ahead of prior year. Given how our cash flow has trended, we are slightly raising our expectation for CapEx. For the year, we're now targeting CapEx net of disposals and the purchase of our headquarters in the range of $155,000,000 to $175,000,000 During the quarter, as planned, we did not repurchase any shares of stock and year to date repurchases stand at $17,300,000 We will be cautious in our approach to any meaningful level of buybacks until the markets are well into their recovery stage. Moving to guidance on Slide 12, given how well our business has performed throughout the pandemic and based on current market conditions, we are reestablishing 2020 guidance. We now expect 2020 adjusted EBITDA in the range of $470,000,000 to $500,000,000 This is based on the assumption of a slight slowdown in our environmental services profitability from Q2 levels, while the Safety Kleen segment improved sequentially. This guidance assumes that there will be continued localized outbreaks of the virus, but does not assume any kind of nationwide shelter in place like we saw in early Q2. Looking at our guidance range from a quarterly perspective, we expect our adjusted EBITDA in the second half of the year to be evenly split between Q3 and Q4. Here's how our full year 2020 guidance translates from a segment perspective. In Environmental Services, we expect adjusted EBITDA to be just slightly above 20 nineteen's level of $446,000,000 Growth and profitability within incineration, contributions expected $100,000,000 in decontamination work and comprehensive cost reduction initiatives will offset declines in profitability within industrial services, landfills, remediations, waste projects and other lines of business. For Safety Kleen, we anticipate adjusted EBITDA to decline approximately 20% from 20 nineteen's 282,000,000 dollars We expect the branch business to remain below pre COVID levels in the back half as vehicle miles driven are still less than historical norms, but well above Q2 levels. At the same time, we expect SK Oil to rebound from a challenging second quarter as the base oil market improves from a difficult April, May period and we continue to aggressively manage the front end of our re refining spend spread. Our corporate segment, we expect negative adjusted EBITDA to be essentially flat from 20 nineteen's $188,000,000 due to increases in 401, severance and bad debt, largely offset by lower incentive compensation and cost savings. Based on our current guidance and working capital assumptions, we expect 2020 adjusted free cash flow in the range of $200,000,000 to 230,000,000 dollars Free cash flow is always hard to accurately predict due to the influence of working capital demands. However, with our ability to defer all payroll tax payments from April to year end, which should total $360,000,000 it is likely that we will deliver free cash flow to shareholders certainly north of $200,000,000 In summary, while Q2 was not without its challenges, it proved to be a strong operational quarter for the business. As Alan highlighted, we are a crisis response company at our core and we can thrive in these types of dynamic environments. Looking ahead, we will pursue additional cost control initiatives while market conditions remain limited. That said, we see the opportunity for some of our stalled lines of business to recover. Some of our project and turnaround work may ultimately push out until 2021, but we see enough opportunity in the market today to support our facilities network in the back half of the year. Within Safety Kleen, we expect a steady uptick in demand from our core branch services while meanwhile within SK Oil, we will continue to ramp up base and blended production. And lastly, we remain focused on providing COVID decontamination services as the race toward a vaccine continues. With that, Rob, please open up the call for questions. Thank you. We'll now be conducting a question and answer Thank you. And our first question is coming from the line of Tyler Brown with Raymond James. Please proceed with your question. Hey, good morning guys. Hey, Todd. Hey, Mike. So I just want to make sure that I have it, but the $23,000,000 in EBITDA from the assistance, was that basically a PPP payment with roughly half of it in ES and half in SK or is that not right? Yes. So Tyler, it is so first of all, before we get into and I should've said $36,000,000 I think I said $360,000,000 So that's wrong. Okay. So, Tyler, it is so first of all, before we get into and I should've said $36,000,000 I think I said $36,000,000 I think I said $360,000,000 So that's wrong. So $36,000,000 is the right number, just FYI. Some people think that's Crazy. So Tyler back to your question. So the money we received is broken into 2 parts. A portion of it is from the Canadian government, as Alan mentioned, the Canadian emergency wage subsidy and that's about 10 of that. And the other 13 or so is from the CARES Act. That's not a PPP loan. That is a retention credit and that money is not refundable. It's a grant, not a loan. And that is broken out between $13,000,000 in ES, dollars 8,000,000 in SK and about $2,000,000 in corporate. Okay. Yes. No, that's very helpful. Because of reimbursement of wages, Tyler, it's all in the P and L where it belongs, whether it be COGS or SG and A or what have you. Okay. Yes. No, that's very helpful. But to be clear, there's not an expectation of additional assistance in the back half guide? There's nothing there today. I do think both the CUES second version that they're working through the Canadian government and the CARES Act both the House and the Senate bill have additional monies available for the retention credit. How much we get and how much we qualify for is an open question. There isn't really much of anything in the back half of the year in the number we gave this morning. Okay. Awesome. That's helpful. And so Alan, this may be a hard question because I know that there's a lot going on in SK. But based on where base oil is and CFO is today, and if you isolated just the re refineries that are operating, let's call it normally, do you feel that you're achieving an adequate spread or even a pre COVID spread on those gallons? I mean, it's a gut feel, but it feels that the team is managing the spread very well, but it's really hard to see with all the noise. Yes, I think we're really managing the spread very well. But unfortunately, we are carrying and have been carrying a lot of surplus capacity, because when all the states shut down and when all the driving really was significantly reduced, the volume of waste oil obviously available to us was significantly impacted. And then also the demand for our oil was also significantly impacted. And so on both sides of the coin, we had to address that. And so by temporarily shutting our plants, we always keep people there, we always have to keep the plants ready and in compliance. So we carry a lot more cost when that otherwise would be absorbed if they were running. So I think the team has done a really good job of managing the spread. Okay. And just would we expect that gallons collected would just be slightly under last back half of twenty nineteen? Is that a good expectation? I think we're seeing we're bringing drivers back. We did have to furlough some drivers, and we're bringing them back. We are hiring more drivers today. So our expectation is by the end of the year that our volumes will be back to where they were based on what we're seeing right now. Okay. And then my that's great. And then my last one, Mike. So I think you guys are about as cash heavy as maybe we've ever seen you. Your leverage is at 2x. You have a 4% coupon. I think you're projecting additional cash flow in the back half. I totally appreciate the 4 pillars of the capital allocation, but when should we really think about you putting some capital to work maybe on buybacks or acquisitions? I think this is Alan. I mean, we would very much like to continue with our acquisitions. We've had some discussions out there where we've been looking at some opportunities that have been presenting themselves. Again, we're somewhat relieved that we didn't do a couple of deals that we have looked real hard at prior to COVID, because I think integrating acquisitions during those last 4 or 5 months would have been extremely difficult with, at least in our case, over 3,000 people working from home. So I think as we get out of this pandemic and we get people back, I think we're going to be in a better position to acquire and integrate businesses like we have in the past. The next question is from the line of David Manthey with Baird. Yes. Thank you. Good morning, guys. Good morning, Dave. Good morning, Dave. Yes. So first off, a 3 part question on ES. First, do you have a read on what we might see in terms of incinerator capacity utilization in the Q3. Related to that, second is, did you pull forward any scheduled downtime? And then third, you mentioned, yes, profitability is supposed to be lower quarter over quarter here sequentially. Is that due to the reduction in the government assisted programs? Or is that if we exclude the benefits here in the second quarter? I think on the maybe Mike, I'll take the downtime. My anticipation is that the normal turnarounds for our incinerators is progressing and we didn't pull anything forward. And we did bite into our deferred a little bit, but quite frankly, it was above the historical average anyway. So when we came into the at the end of the Q1, we had a lot of waste, not only on-site, but throughout our TSCF network. So I think we feel good about where we are now on a deferred basis, and I think the plants are running as expected. And I would think utilization will continue to be quite strong. Mike, you want to chime in on? Yes, sure, Dave. So first of all, there's no in the back half number, there's no government money that if we do get any money, it will be upside to the model, maybe like $1,000,000 under the Canadian wage subsidy, but that's about it. So just to set expectations there. Utilization in the second half will be is normal. I think the mix is not is really what's going to drive a little bit of profitability with chemical being down a little bit versus Q2. Remember, we're a waste business. We get the waste late and I think we're experiencing a little bit here in July. Not a lot. I think it's flattish, if I'd have to say, and from Q2 to Q3 in the incineration part of the business. Down days are normal. Nothing we didn't move anything around. Okay, sounds good. And then just a 2 parter on the SK side. Is it right to assume that as the facilities went down, those shuttered facilities, you did routine maintenance on and you pulled that forward? And then second, Alan, you mentioned the potential for lube oil supply and demand getting out of balance later this year. I was just wondering if you could clarify that statement. Sure. I guess on the shuttered and maintenance or maintenance, we also did quite a bit of capital investments in a number of the plants that were shutted. So our anticipation was that this was going be temporary, and we did take advantage of being down to accelerate a couple of key CapEx projects that are going to be complete here relatively soon. I think the as we see the crude oil runs for the refineries and the amount of products that are being made, obviously, that has recovered quite a bit, although refineries maybe are only still running 75%, 80%. With the significant decline in jet fuel, certainly there is to some extent, we think pressure on the base oil side of the business as well as with IMO not really kind of materializing. We just see that the market is still somewhat out of balance from our expectations where we were in January February, and I think that was really the kind of color that we were trying to explain in our remarks. That's great. Thanks very much. Okay. Thanks, Dave. Our next question is coming from the line of Michael Hoffman with Stifel. Please proceed with your question. Thank you very much. On SKL, what should we be using for production activity in the second half just instead of trying to guess the gallons per plant that are being turned on? So 120 at East Chicago, Kansas is what, 15? The Lotto is 10? I don't have that number, Andy. I can certainly Those are directionally, those are the right numbers, I would say, Michael, for those three locations. Okay. And then average branch revenue per week, how would you describe the trend relative to pre COVID? Where are we percent recovery? Yes. So Michael, it's all about exit velocity here in June. And so we were in the low 80% range by branch by week as we exited June. Have that ramping up into the mid to high 80s as we get into Q3 and back into the low 90s in Q4 for the SK branch business. Okay. All right. That's terrific. That makes sense. Yes. Yes, I think that makes sense. And then just want to make sure I heard that I was scribbling numbers so fast, I want to make sure I got them right. So the guidance says ES is flat to up year over year, SK is down 20 and then corporate overhead is basically flat and that gets you to about the midpoint at 4.85? Correct. Okay. In the SK, I'm assuming your inference was down 20 that the SKE is down more than 20, SKO is less than 20. What's the gap there? Is it 1 is 25 and 1 is 15? And how do I think about that? No, the losses are probably more in the SKO side than the SKE side. Okay. Okay. And then in your midpoint of guidance, what should I account for the benefit from decontamination? Then I'm assuming there's $23,400,000 in the $485,000,000 in both free cash flow and the 215 percent free cash flow and the $485,000,000 for EBITDA. But what's the decon piece of both of those? So we don't give that number out for competitive reasons. It's above the corporate average, though. Above the corporate average. Okay. All right. That's what I needed. Thank you so much. Our next question is from the line of Jeff Silber with BMO Capital Markets. Please proceed with your questions. Thanks so much. Just wanted to go back to the pandemic relief funding. I just want to make sure I understand it. This is not in revenues, this is just an offset either to cost of services or SG and A, is that correct? Correct. Okay, good. Just wanted to double check on that. Alan, you mentioned IMO 2020 briefly. Can we get an update of what's going on there and what you think is going to happen over the rest of the year? I just think there's been such a huge disruption. As you know, the whole shift from the 3% sulfur to 0.5% certainly has taken place. I don't think that we have heard of any relief at all given, but I think just the sheer volume of decline in demand for 0.5% oil and subsequently how that impacted the VGO market, the vacuum gas oil market, all of that has just been turned upside down. So we looked at where we were coming into early January to where we are today, I mean, it's just a total different ballgame from evident we can see. Yes. This is Jeff. One thing to add. So just to be clear, IMO is still a regulation. It still applies. It's just ships aren't moving, right? Cruise ships, tankers, it hasn't really gotten unstuck. And so, Alan, obviously IMO is we had visions at this time having IMO being a big catalyst for this business in 2020 and it hasn't happened yet. That doesn't mean it's not going to happen. It just hasn't happened yet because of the pandemic frankly. Yes. Yes. Completely understandable. And one final one. We get this question a lot, so I'll just ask you. We've got a big election coming up over the next few months. Anything on the horizon besides tax reform that you think might impact your business if we have a change in administration? Thanks. I don't think so at this point. I mean, we've seen historically that no matter what administration is in, environmental rules and regulations are being enforced and new ones are being promulgated. So I don't we don't typically see one administration to another really impacting our business on the short term. I mean, we can debate as to what's going to happen with corporate tax reform in a different administration. But a lot of the state a lot of the regulations around what we had to comply with is at a state level. And they're just as diligent as they've always has been with enforcing state regulations on us and on our customers. Okay, great. Really helpful. Thanks so much. Our next question is from the line of Hamzah Mazari with Jefferies. Please proceed with your question. Hey, good morning. Thank you. I was hoping you could hi. I was hoping maybe you could just give us an update on just what you're seeing in the captive incinerator market. Are you seeing more of those shutdown? Are you seeing people acquire them? How does that capacity evolve over time? And anything with COVID that disrupts that, just any update there would be helpful. We've seen a lot of, what I would say, a lot of noise in that area, as you can imagine, because as customers excuse me, as our customers were impacted by COVID, obviously, that impacted their plants. And in some cases, we saw captives shut down, and we got a lot of volume because of that. We're not sure where all this is going to shake out because there's so much uncertainty there. But I'm sorry, I would say that it's been a positive for us. We did see one plant that was taken over by our competitor that really struggled to try to handle commercial hazardous waste at that site. We subsequently regained that business that we had lost to them. And I think that's probably true for any captive out there that wants to try to go commercial. Very difficult to have all the necessary pretreatment and processing capability to kind of handle the kind of waste that the commercial hazardous waste business generates. So I would say that we're still looking at the captive closures as a positive for us. Got it. And just my follow-up question would be just around the average price per pound in the incinerators. We were running at double digits and we're at 6% today, which is still very healthy. And I realize it's a function of mix. But could you just comment on do you see mix benefits as decelerating given where we were or just how to think about the average price per pound of the incinerator going forward? Is 6% the double digits that we saw pre COVID? To sort of the double digits that we saw pre COVID? We continue to look at mix as the most important thing right now for us that sits in our control. But I would tell you that we've taken our foot off the gas on price increases right now, realizing where our customers are. We saw on the industrial side of our business, for example, we saw big requests for discounting and lowering of our price for the next 6 months or 9 months. So we what we've been trying to do is work with our customers out there. We've held off on any new price increases, realizing where everybody is in dealing with this pandemic, and we'll probably relook at that in January. But I think the price number that you'll see is going to be really reflective of the mix right now. Got it. Thank you so much. Okay, Hamzah. The next question is from the line of Brian Maguire with Goldman Sachs. Please Just a couple. One, I think just a little bit back to Michael's question, but just with the 2 re refineries restarting, any sense where production volumes could be in 3Q versus the 2Q level or sales volumes, if you could get that granular with it? I think the combined number is about 35,000,000 gallons from those 2 on an annualized basis. And they are both running typically our plants will run full bore when we start them back up again. So by the end of July, we made the decision to turn those two plants on. So that would be the annualized number. Maybe I'll try to answer your question a little different way, Brian, in that we'll be at kind of 75% without Presley. And as we think about the profitability of that business, we took the kind of the exit velocity in June and kind of was very modest as how we think about July, August September. So it really is a it's a modest recovery from where they landed in Q2 and with the ramp up going into Q3 and Q4 and into 2021. Okay, great. And then on the SG and A down $20,000,000 or so year over year. Just wondering how much of that you think is sustainable either through the back half of the year or probably more importantly just once we get sort of through the crisis expecting probably a lot of the healthcare stuff will come back, all the delayed surgeries and people getting back to work. We'll probably see reflation in that, travel expense, maybe doesn't come all the way back, but comes back some. Obviously, some of the government assistance that goes away. But kind of over $20,000,000 how much of that do you think is truly out of the business versus stuff that will eventually come back in? Yes, Brian, it's actually a really good question that we've done a lot of work to think about both on the cost of goods sold and on SG and A. Both have some real cost savings in there. Some of that's government funding and it goes away. But I think of it kind of as 3 different buckets. The first bucket is things that happen to every company in the world with healthcare costs of your self insured going down and travel costs going down and other things that affected everybody. And so we're obviously with the beneficiary of that. And my assumption is that in a post pandemic world over some time horizon those costs come back relatively quickly 6 months, 3 months, a year depending on how you look at it. The other costs are things that kind of because of the crisis, because with Al's leadership it was lower for longer, we took some aggressive actions around taking costs out of the business, both on the SG and A. When looking at over time, looking at employee utilization, looking at leases, looking at facilities, shutting facilities, shutting locations, being very aggressive about that. And I think my view on that is that we actually put some good tools in place to manage that more effectively. And those types of tools and that type of muscle doesn't go away in moment we all get a shot in our arm. So I really do believe that over the longer horizon, both on the SG and A and on the cost side, there's margin expansion that we'll experience out of here because the cost we took out or the actions we took didn't affect sales. I mean the sales force is there and we're hopeful that when that recovers we'll have an opportunity there to really leverage our cost structure and be smarter about it and take some of the lessons we learned in this pandemic and apply it over the longer horizon. So what that exact number is of the 20,000,000 stays and goes, it's going to be hard to put a finger on because there's a lot of offsets to that with bad debt and other things. But I think that over the long haul, there really is a lesson here that we've learned and I think there's some real savings we'll get over the long horizon. Yes. Just last one for me. We appreciate everything you're doing on the decontamination side to help people get back to work. Just looking at that market, obviously, it's kind of great to have it while you have it, but for a lot of reasons, you hope that it doesn't continue forever. But are you seeing just the competitiveness in that business? I mean, it seems like one where a lot of people are probably looking to get into that market because of the opportunity today. So the $50,000,000 or so that you had in the quarter, it seems like you're expecting some deceleration. Just wondering how much of that is just because you think that the actual market is going to be shrinking from 2Q levels versus just increased competition or new entrants as the year progresses? I guess I would say that there's always been competition in regard to some of the decontamination work that we have historically done. And I think people choose Clean Harbors really for the professional approach that we take and the training and the personal protection and really sort of the insurance policy that we provide for them. And there are plenty of firms out there that are janitorial kind of firms that will also provide that kind of decontamination work, but we just think that we're not really competing with them. We don't look at this from a pricing standpoint to be competitive with these other players out there. So any slowdown is not necessarily because we have competition. I just hope we all pray that it's going to continue to slow down as the infection rate slows down. Yes, absolutely. Okay, thanks so much guys. Good luck. Thank you. Okay. Thank you. The next question is from the line of Noah Kaye with Oppenheimer. Hey, guys. Thanks for taking the question and really nice job managing both the profitability and the safety. I would like to start with just clarifying maybe expectations around the price mix trajectory in ES. So it sounds like we may see a bit of downward pressure in the back half, partly from mix and then also from pausing these price increases. I guess looking a little bit longer term, with the assumption that you could maybe resume price increases for a portion of your customer base in 2021 and then just assessing production planning for petrochem, do you think we could potentially see a reacceleration of price mix benefits in 2021? Is that a reasonable expectation at this point? Yes. Noah, that's a good question and too early to kind of talk about 2021. But I will say that over the past 10 years in our pricing, we've been able to get 3% to 7% and I don't see anything that's going to change that in a post pandemic world. So, and it's tough to really speak to 2021, but I would say that the pause that Alan spoke of, it does affect Q2 and Q3, and I think that it's going to be the smart thing to do, the smart business thing to do. But over the long horizon, I don't see that I don't see any type of shift there. As a matter of fact, what I do see is that there's an opportunity for clean harbors when you talk about putting supply chains closer to the end customers. And it's something that the world has learned is that, that might not be a terrible idea. So I think that might be a long term catalyst for us over the next 5 years. Yes. That makes sense. And then just where does the PFAS remediation opportunity fit at this point? I mean, there's been some noise around both the cleanup and then incineration as the treatment options. How are you thinking about the opportunity? Yes. No, I'll take a shot now and I'm sure has a view on this is that PFAS remains as a very important opportunity for us. And nothing has changed in a post pandemic world. And that I think that we really can get as perhaps a new administration maybe that changes. I don't know. But we still know it has a real opportunity that's out there and we think it's very compelling. We still get a lot of inbound traffic on it, still a lot of learning on it and I think it's going to be a long term catalyst for the industry. Great. Okay, thanks guys. Nice job and stay safe. Hey, Noah. Thanks, Noah. The next question is from the line of Jim Ricchiuti with Needham and Company. Please proceed with your questions. Hi, guys. This is Mike Cikos on for Jim Ricchiuti. Thanks for all the detail and the color today. Hi, Mike. I was curious if you could give me some more detail coming back to this decon work, the $100,000,000 or so we're expecting in 2020. So coming back to the slide, looks like you generated $60,000,000 year to date, dollars 50,000,000 in Q2. So that additional $10,000,000 is that what come in Q3 so far or was that a partial benefit to Q1? And then how I guess if we're looking out to the rest of 2020, should we expect this to kind of tail off in Q3 and then an additional tail off in Q4? Yes, Mike. So the original so $60,000,000 think of it this way for the first half of the year, 10 of it was actually in Q1 toward the end of March and $50,000,000 was in Q2. So we're at $60,000,000 kind of year to date through the end of Q2. We said $100,000,000 so that implies a $40,000,000 in the back half of the year, more in Q3 and less in Q4. Does that give you what you need? Yes, yes, exactly. And then coming back to the assistance funding that you guys received, I'm just curious, could you help us better separate what was included in cost of goods sold versus OpEx? Is it as simple as taking the $2,000,000 in assistance that's attributed to corporate and assigning that to OpEx with the remaining, call it, $21,000,000 or so up in COGS? We'll give you all here's all the details so you have it. And it's in our financial statement. Q is going to be filed in minutes, so it will be all laid out there as well. So $23,400,000 in Q2, $14,000,000 of it in COGS and about $9,000,000 of it in SG and A. And as broken out by segment, dollars 13,000,000 in Environmental Services, 8 in SK and 2 in Corporate. Okay. Thank you for that. And then just one other question, if I could squeeze one more in. Just looking at the EBITDA guidance range that you gave us for the year, this $470,000,000 to 500,000,000 dollars Can you help us parse out some of the puts and takes if I'm trying to think about what gets you to the $470,000,000 versus what would need to go right or go your way to get you up that 500 bogey? Sure. So in my opinion, it really is the speed and trajectory of the growth of certain parts of our business. When you think about the Environmental Services business, if that business slows down, in theory, the decon work will be an offset to that as crazy as that sounds. And so I'm not really as concerned about the environmental services business. On the Safety Kleen business, it depends on the trajectory of kind of miles driven and demand in oil and that is the variable. That's going to drive us to the low end of that range and versus the high end of that range. If that picks up and continues on its current trajectory and does even better, and that will and does even better, and that will really drive that. And corporate expenses, we manage pretty tightly, as you know, and so that's going to be what it is. It really comes down to the in my opinion the SK business will kind of result in either the high end or the low end of our guidance. That's very helpful. Best of luck guys. Thank you. Thank you. Thanks Mike. Our next question is from the line of Matthew Fields, Bank of America. Please proceed with your question. Hey, guys. Just want to ask a balance sheet question or 2. I appreciate you paid down half the revolver balance in the quarter, but given the pretty robust cash balance you have now and then the robust kind of free cash flow outlook for the back half of the year, Why not pay down the full balance? Or is that something you're planning to do kind of if the rest of the year works out in your kind of plan? Matthew, that's a genius idea. We actually paid it down before the in early July. And so when we mentioned that in the script, you must have not gotten that far. Sorry, yes, I dialed in and there's a queue on this one. I know. And then sort of against the same backdrop, I know you don't have any real scheduled maturities, but what do you think about kind of your overall debt load as a function of kind of leverage balancing leverage with kind of maybe ramping share buybacks up later in the year given your kind of healthy free cash flow? Where does that balance strike you at kind of this point in the recovery? I think our real focus right now is to try to grow the business and grow through organic growth as well as acquisitions. And I think we're well positioned to do that with still a substantial amount of our workforce working from home. When we start thinking about doing an acquisition and integrating those and how we typically would go about an acquisition, that would make it a lot more difficult for us to do today than we hope we'll be in the next, let's say, 6 months or so. So I'd like to think that we could really take advantage of the strong balance sheet we have and the low debt leverage we have and do an acquisition that would be a sizable transaction for us. That's what I'd like us to do. Okay. Fair enough. Good luck. Thanks a lot. Apologies, I missed the scripted remarks. No problem at all. Thank you. Thank you. At this time, we've reached the end of our question and answer session. And I'll now turn the call back over to Mr. Alan McKim for closing remarks. Okay, Rob. Thank you. Thanks for joining us today. I hope that all of you and your families are staying safe during this pandemic. Over the remainder of this month, we are participating in virtual investor conferences with Needham, Stifel and Ramey James. We look forward to connecting with many of you then. Have a great day. Thank you, everyone. This concludes today's conference. May disconnect your lines at this time. Thank you for your participation.