Clean Harbors Management Discusses Q2 2012 Results - Earnings Call Transcript
August 8, 2012 11:00 PM ET
Clean Harbors (CLH)
Q2 2012 Earnings Call
August 08, 2012 9:00 am ET
David T. Musselman - Senior Vice President and General Counsel
Alan S. McKim - Founder, Chairman, Chief Executive Officer and President
James M. Rutledge - Vice Chairman, Chief Financial Officer, Treasurer and Director
Albert Leo Kaschalk - Wedbush Securities Inc., Research Division
Matt Duncan - Stephens Inc., Research Division
Arnold Ursaner - CJS Securities, Inc.
Michael E. Hoffman - Wunderlich Securities Inc., Research Division
Richard Wesolowski - Sidoti & Company, LLC
Rodney C. Clayton - JP Morgan Chase & Co, Research Division
Luke L. Junk - Robert W. Baird & Co. Incorporated, Research Division
Jamie Sullivan - RBC Capital Markets, LLC, Research Division
James Kitchell - Goldman Sachs Group Inc., Research Division
Greetings, and welcome to the Clean Harbors Inc. Second Quarter 2012 Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Musselman, General Counsel for Clean Harbors, Inc. Thank you. Mr. Musselman, you may begin.
David T. Musselman
Thank you, Claudia, and good morning, everyone. Thank you for joining us today. On the call with me are our Chairman and Chief Executive Officer, Alan S. McKim; and Vice Chairman and Chief Financial Officer, Jim Rutledge.
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, August 8, 2012. 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 would 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.
And now I'd like to turn the call over to our Chairman and CEO, Alan McKim. Alan?
Alan S. McKim
Thanks, David, and good morning, everyone. In Q2, we generated excellent results in our Environmental and Industrial businesses, while our Energy business was impacted by the winter break up in Western Canada, the unfavorable weather conditions in Canada and the repositioning of our solids control assets and surface rental equipment in the U.S., and I'll discuss more in a moment.
We view much of the slowdown in energy as seasonality, as well as timing related. Therefore, we are reiterating our full year 2012 guidance. We're confident that we can achieve the full year financial targets we set for ourselves based on expected growth across our business lines and the current conditions we see in the marketplace.
Q2 is the weakest operating period for our Oil & Gas Field Services segment because it depends on the timing of the spring breakup, the sensitivity to wet weather is heightened due to the mud season that ensues.
As we highlighted on our Q1 call, the spring breakup came early this year, about a month earlier than in 2011, due to the warm conclusion to the winter in Western Canada. The breakup, which includes road bands, weight restrictions on the movement of heavy equipment, was also lengthier than normal this year.
The remote regions of Western Canada, where we operate, had a tremendous amount of rain and snow melt, which greatly extended the wet season and stalled operations for us and our customers, while travel restrictions are no longer in effect today and the fields around the drill sites out in the prairie regions has since dried out, it heavily curtailed our activity in Q2.
The other factor behind the results in our Oil and Gas Field Service segment this quarter is the ongoing shift in the U.S. by major energy companies from dry gas wells to liquid-rich and oil plays. This trend, which we touched on during our Q1 call, continued during the quarter. What that shift means to Clean Harbors is that in addition to winning the business, we have to relocate our equipment from the dry gas sites that we're servicing to these new liquid- plays.
Unfortunately, that process takes time and money. The solids control assets and surface rental packages that we are repositioning to new drilling locations includes a variety of equipment, such as centrifuges, frac tanks, fluid control, pumps, generators, light hollows [ph], well site trailers, et cetera. So much of this is made up of the peak assets that we acquired in mid-2011.
We're aggressively moving ahead with redeploying these packages. And while I don't want to view specific numbers for competitive reasons, about 1/3 of our surface rental packages are in the process of being repositioned. We are fully confident that all of them will be in position to be fully utilized again in the fourth quarter.
Let me now turn to our other segments, which generally had strong results, especially our Environmental business, which extended the momentum we saw in 2011. Within our Technical Services segment, utilization at our incinerators surpassed 90% for the quarter, and at these high levels, where we achieved, we are able to maximize our profitability. Our U.S. locations generated 88% utilization. In Canada, our Sarnia incinerator was essentially 100% utilized this quarter.
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