Greetings, and welcome to the Clean Harbors second quarter 2016 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Michael McDonald, General Counsel for Clean Harbors. Thank you. Mr. McDonald, you may begin.

Thank you, Doug and good morning everyone. On the call with me are Chairman and Chief Executive Officer, Alan S. McKim; Vice Chairman and President, Jim Rutledge; EVP and Chief Financial Officer, Mike Battles and our SVP of Investor Relations, Jim Buckley. Slides for today's calls 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 3, 2016. Information on potential factors and risks that could affect the company's 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 forward-looking statement made in this morning's call other than through filings that will be 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 in 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 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 and good morning, everyone. Thank you for joining us. Beginning on slide three, our revenue and adjusted EBITDA in Q2 were below our expectations for several reasons: the ongoing slowdown in the energy sector combined with softness across several of our key industrial markets limited our growth opportunities; a constrained spending on projects and reduced near-term waste volumes from several key verticals, particularly, our chemical vertical. In this weak market environment, customers continue to push for pricing concessions, placing further pressure on our margins. Safety-Kleen continued to perform well. Safety-Kleen Environmental delivered its eighth consecutive quarter of year-over-year growth in profitability. Kleen Performance Products more than doubled its profitability from Q1 levels as we continued to effectively manage the spread in that business and base oil prices increased during the quarter. However, the full impact of these price increases typically lags 60 day to 90 days from announcement and will be more visible in Q3. Given the persistent softness in energy-related markets and the corresponding sluggishness in industrial production, we've been working diligently to expand our $100 million cost reduction program. We have cut our workforce by more than 900 employees and contractors. Through dozens of other initiatives, we have successfully eliminated costs in many areas. However, we intend to further expand our cost reduction efforts to lower our cost structure and improve our profitability. Turning to the segment review, beginning with Tech Services on slide four. Revenue and profitability declined in Q2 due to the lower U.S. industrial production, less energy waste and customer deferrals of large-scale projects. In particular, we saw lower waste streams from the chemical vertical which was down about 9% from a year ago. Incineration utilization was 88%. A key factor in this for Q2 was the increase in turnaround days at our…

Thank you, Alan, and good morning, everyone. Turning to our income statement on slide 16, revenue declined by 25% in Q2 due to a mix of factors. Primarily among these was the $170 million contribution from energy response activity in the second quarter of 2015, as well as further deterioration in the energy and industrial markets. Gross profit for the quarter was $217.5 million, which translates to a gross margin of 31.2%. If you backed the emergency response revenue and costs out of last year's second quarter, our gross margin percentage was essentially flat year over year. That said, SG&A expenses declined 11% million in dollars to $107.1 million as part of our cost saving program. From a margin perspective, however, SG&A accounted for 15.3% of revenues versus 12.9% in Q2 of 2015, when we benefited from the significant emergency response events. SG&A also rose as a percentage basis from Q2 of 2015 as a result of investments in our selling organization which was outlined on prior calls. In absolute dollars, we still expect full-year SG&A expenses to remain close to flat with 2015 as investments offset cost savings. Depreciation and amortization increased $5.6 million to $73.4 million, reflecting acquisitions and some other small adjustments. Primarily as a result of the completed and planned transactions, we now expect depreciation and amortization in the range of $285 million to $295 million for 2016. Income from operations in Q2 was $34.5 million, well below prior year due to lower revenue and less favorable business mix. Second quarter 2016 adjusted EBITDA was $110.4 million, slightly below our expectations. This figure includes $3.2 million in integration and severance costs relate d to the continuing head count reduction in several of our energy-related businesses, expenses associated with the integration of acquired companies and other costs.…

Thank you. Ladies and gentlemen, at this time we will conduct the question-and-answer session. Our first question comes from the line of Al Kaschalk with Wedbush Securities. Please proceed with your question.

Hey, good morning guys.

Good morning, Al.

Hi Al.

– environment continued to be a challenge. I want to maybe focus first on the acquisitions, Alan, that you've announced or that you're going to complete.

Yes.

I wasn't clear, are these more on the Technical Services side or is there some component to it on the closed loop program that you are certainly expanding in the U.S. Could you just talk a little bit about what you're going to get from this? It sounded like there's also a refinery in there as well.

Sure, so we're certainly expanding our footprint in the West Coast. And I think I'd mentioned that we've been somewhat capacity-constrained in Southern California. So this would give us a much more significant asset and capability to further expand our business there, but also to move more waste out of that market more efficiently, particularly to the El Dorado incinerator, up in the Pacific Northwest, really expanded our permit capabilities and technology there as well to allow us to penetrate that market. So I think as you think about some of our growth strategies, expanding geographically, expanding capabilities is clearly what we're doing here, as well as in, quite frankly, in the middle part of the country. We've picked up an additional wastewater treatment plant. The company operates over 600 vacuum trucks and is the largest handler of a lot of non-hazardous and hazardous wastewater, so we have added more internalization for that on our Environmental. So I think a strong focus on growth in our Environmental space, but also quite frankly, supporting the closed-loop side of our business as well, giving us more presence in the Gulf, more presence in the West Coast, an expansion of our blending capability, coupled with the additional infrastructure on the waste oil collection side. So some real, what I would say, is a real nice combination between Safety-Kleen Environmental and Clean Harbors Tech and Field is a good way to characterize what we did – including some blending capabilities too. Is that helpful, Al?

Yeah, it is. On the blending or closed-loop, you had talked previously and certainly the market's been looking for a little more color on the program. Could you talk where you're at there? When should we see some milestones? If they're out there already, how they're progressing? That would be helpful. Maybe as a exit – your plan for exiting 2016, what that business looks like?

Well, I would say that we are certainly early in the game. We've laid out kind of a three-year to five-year plan to shift our business away from being in the commodity base oil business and more into the blended oil side of our business. And I think you saw probably the best results in the blended side. We continue to shift some of our blended volume from sort of unprofitable customers to our direct customers and we've had some good successes there. I would say that our pipeline is growing in the blended side of our business. From an infrastructure standpoint, we are essentially in a launch now in the United States. So we've seen some real good feedback from our pilot in New York. The work that we've been doing in Canada has been going very well for us. And so I would say that as we look out to execute on that three-year to five-year plan, I would like to feel like we're on track with that and we've got some nice momentum and excitement going on within the Safety-Kleen organization, particularly.

Hey, Al. This is Mike. One other thing to add to Alan said is that if you look at kind of a rollout strategy, we're in Eastern Canada, we're in upstate New York and now we're going to other jurisdictions as we continue to roll this out smartly. And as Alan said, we are going to put processes and the procedures kind of in the systems behind it to make sure it's effective. Some of these acquisitions do help us in certain geographies in that area, but I think that the closed-loop model, as we talked about in the back half, profitability for our Safety-Kleen businesses, both of them, you can see the effect of that starting to take hold.

Great.

Can I add a point on that? Yeah, this is Jim, Al. And also even in Q2, we had some direct gallons through our pilot program and it's at an – I would say at an annualized rate of, in excess of a couple million gallons that we've been selling direct back. So it definitely is taking hold.

I think just one final point. We have over 20 distribution centers and 190 branches and all of them will be providing packaged products to their end customers beginning in September with our across-the-board launch here. And we will follow that up with a lot of our bulk offerings soon thereafter. So, again, we have that infrastructure. We've been testing our supply chain. We've been making sure that this is going to work and be sustainable. And so we're pretty excited about turning on 900-plus salespeople to be able to sell the kinds of capabilities we have now.

Great. Just as a follow-up, and then maybe throughout the course of the call, I'm sure it'll come out, but could you – there's a lot of moving parts here on the guidance, some pluses, some minus, plus the cost program. But maybe you could bridge the prior guidance to the current guidance with some of the major components. Thanks a lot, and good luck, guys.

Thanks. So I'll start with that. So we started with $430 million to $490 million. And all we're doing, Al, is kind of lowering the high end, and that's really a result of kind of continued softness in certain end markets as we saw in Industrial and Field, particularly in Western Canada. That has been kind of soft here. And we just felt it was prudent to kind of walk back the high end of the range. We still feel very confident to the $430 million to the $450 million. But when we set the guidance out, the idea of setting out a kind of a wide goalpost to make sure that we got through it, there's nothing to change in that answer. Some things – as I mentioned in my prepared remarks, there were some pluses and minuses. Safety-Kleen continues to do well, Industrial and Field struggles, Oil and Gas and Lodging not surprisingly struggles. And so those types of things are kind of balancing themselves out probably a little more negative than positive. Some of it's fire-related, some of it's other reasons. We feel, though, confident in this range as we enter the back half. The acquisitions are good guys, minus the divestiture, it's modest in the back half of the year; it's not a game changer. We're hopeful that in the future, it's going to be – we know in the future it's going to be highly accretive in part of both the closed-loop system and our, let's say, legacy Tech business.

Our next question comes from the line of Larry Solow from CJS Securities. Please proceed with your question.

Good morning, guys.

Hi, Larry.

Just a few follow-ups to Al's last question, just on the – can you maybe just help us just quantify – it doesn't sound like the acquisitions as a whole will be super-accretive in the back half of the year. But I assume they will add some EBITDA or – right to that. So can you maybe give us sort of a ballpark net EBITDA from the acquisitions minus what you're selling?

So, Larry, this is Mike. So in the back half, I'd say big round numbers. Some are additive, the acquisitions and divestitures are negative, right. And so you kind of take the net of all those – and it's kind of in the high single digits of the millions, maybe $5 million maybe up to $10 million of incremental.

Okay. Of net, between the...

Between the good guys of the acquisition and the bad guys from the disposition.

Got you. And then the cost cutting, it sounds like you're going to be well above that $50 million. Have you added some higher cost-cutting contributions into your EBITDA numbers, or any way to quantify that?

So, Larry, we're making good progress. As Alan mentioned, we kind of meet every other week and we've gone through it and there are – the 53 different projects and a lot of actions that still, let's say, are getting a lot of success. You know that – as you look at the pricing pressure that we're under, that may not be enough. And so, Alan and the team are putting together another group to kind of go after areas that we haven't really gone as deep as we could, and whether that be in transportation, logistics and other areas that we find – we're still hoping there's opportunity to get some more costs out. How much we get in 2016 is unsure. Certainly, the integrations and the cost actions associated with acquisitions will be a focus, and there'll be some cost savings there. And there could be cost savings in our base business because of that. But those are early days on that. We are committed to the (37:57) program. We're committed to the plan, we're putting resources and people to kind of drive that answer. And we're hopeful that as we go into 2017, we'll have a clearer picture as to what that exactly is.

Got it. And could you maybe just characterize the markets – the energy and the industrial markets obviously have been lackluster for quite some time now. Energy probably even worse. Obviously, oil prices came up a lot, but I don't think volumes and output have. Just in your sense, and relative to why your guidance is maybe coming down a little bit, have things gotten worse or did things just have not gotten better like you maybe assumed they would?

Well, I think they've gotten worse. I mean, I've read over 360,000 jobs lost in the energy sector, looks to be close to $1 trillion of capital has been reduced in spending on capital projects and expansion. So where – we recognize for us to be competitive with the small amount of work that's still available out there that we have to be very, very price competitive. I mean, there – anybody in the energy space is demanding lower pricing. There's a lot of competition. There's a lot of people going out of business. And so we need to be as efficient and as cost-effective as we can to be competitive in a very small market that exists today. And that's just the current realities. So we are doing, I think, a relatively good job of shifting assets out of Western Canada. We have moved a substantial number of assets into the Gulf and began putting those to work, particularly our hydrovac business; you'll see that continue to grow in the quarters ahead. And we continue to look at all ways of making money in a very small market in this environment that we're operating in.

Can I add a point to that, Alan? This is Jim. There are some bright spots, though. If you look at Automotive, you look at Pharmaceutical, Health Services, those kind of businesses. So to Alan's point, with redeploying some of the assets in the energy area, we're able to capitalize on some markets that are better actually.

Great. Just lastly on the positives. It sounds like El Dorado is certainly progressing on plan. I guess more of a – do you expect some contribution of that in Q4 or is that more of a 2017 event? Thanks.

Yeah. We're just – we're actually going through start-up. We're literally substantially complete now with construction. The plant is a first-class facility, and we're going through component start-up, and we should be going through trial burns and starting up that – making that plant hot in the fourth quarter. But I don't expect anything this year.

Yeah, we don't have anything – nothing in our forecast associated with the new incinerator. That's a 2017 event.

Got it. Okay, great. Thanks, guys. I appreciate it.

Yeah.

Our next question comes from the line of Scott Levine from Imperial Capital. Please proceed with your question.

Good morning, guys.

Morning, Scott.

Firstly, I'm not sure if you did this, but is it possible to quantify the impact of both the fire and the Gulf flooding during the quarter? Is it kind of tens of millions or single-digit, or any more specifics you can offer?

It's been hard to quantify. We've looked at how to kind of position ourselves on the call here this morning, to quantify it. But I would say that we were having calls twice a day. The entire leadership team was focused on the fire and all of the demands that were put on us. We had 600 employees in that region. We had a lot of customers that were significantly disrupted. We had a lot of assets that we had to move and protect, putting fire protection in place. It's very, very hard to kind of quantify. But from the board all the way through the leadership team, we were spending daily during a two- or three-week period of time here. I just don't think we have a number, but all I can tell you is a huge distraction for the entire business here. Because you had a lot of fellow employees worrying about what's going on with our team up there, and a lot of people traveling back and forth to help. So just can't give you a number unfortunately.

Is it fair to say – and I don't know if this is answerable either – but if not for those events, you guys would have been close to in line with your guidance, do you think, or was the underlying environment that weak that you guys probably would have missed your target anyway?

I think when you think about all those significant facilities shutting down, we had a huge catalyst change-out job, for example, going on that one of the upgraders up there. But all of our major customers – in fact, one of our largest customers got substantially damaged during the fire, has not started up. And it was our single largest customer to our landfill in Alberta. And so that had a huge impact on our EBITDA in our Environmental business because of that. We're not anticipating that plant to go online this year. So I think the answer is yes.

Yeah.

But I don't – I just can't give you the exact number. But I think my gut tells me, yes, we would have been on track.

Yeah, between the down days and the mind share and what would we do if that wasn't there, that's a tough question to answer, to be fair, right? But it's clearly, as Alan said a minute ago, is that – we had shutdowns of our customers. That's work didn't come back by the end of Q2. That's revenue and EBITDA that is not there.

We had chartered planes moving people to get out of...

Yes, chartered planes, fuel, water. We had people living in our lodges, residents with dogs and cats and families.

Yeah. Fair enough. And then maybe trying for a little bit more color on the energy-sensitive businesses, which seem like they clearly deteriorated. Did you see any improvement in those businesses throughout the quarter at all or did they deteriorate throughout the quarter and then now with oil retrenching and going down again, just trying to get a sense of whether things stabilized at all in any of those businesses as the quarter progressed and if so, which ones?

No. Typically, the second quarter is our weakest quarter in that space anyway because you go through breakup and it's always our weakest quarter. And this was no different. It's just a lot worse with the fire. I would say that as we went through our midyear reviews and looked at our pipelines for this year and into next year, clearly there's optimism, particularly in the states, but even in some parts of Canada where we're seeing some improvements and some customer spending coming back, but nothing in the quarter, nothing in the second quarter.

Got it. One last one then. With regard to the repurchase activity was light here and it was light last quarter as well. Just wondering, is that more a function of some of the M&A picking up or views on the stock price, maybe a little bit more color regarding your thought process on the buyback and whether activity picks up there in all likelihood, or you expect to remain opportunistic?

Hey, Scott, this is Mike. I'll answer that and Alan can jump in. So, we bought back 5 million in the quarter, a little more than that. And that's really a function of kind of looking at kind of where we are with acquisitions in the quarter. We ended with a pretty robust cash balance, but that's really just because of the timing of the close of some of these transactions. As we said before, we look at the return on investments versus the stock price versus the underlying other alternatives that are out there in the marketplace and we'll continue to do that. And we will continue to – we still have $112 million remaining under our program. We're still kind of actively buying back shares. That volume is contingent upon the market, contingent upon other opportunities in our space.

Got it. Great, thanks.

Thank you.

Our next question comes from the line of Michael Hoffman from Stifel. Please proceed with your question. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Thank you for taking my questions, Alan, Mike and Jim.

Morning. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Hey. Mike, the – I get the guidance revision on the EBITDA and I want to come back to it a little more on billing, waterfall for how you go from A to B, but the free cash flow is down more proportionally, so what's underlying that?

Yeah, I'd say that Michael, it is a function of a variety of things. I'd say that the underlying business has softened. And we aren't getting as much transaction in, let's say, DSO and other types of working capital metrics. We still remain committed to the $150 million to $200 million. We do have a plan of divestitures; the one we're talking about here, but in the future, that will be part of our ongoing free cash flow. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. Fair enough, but the old-fashioned way to calculate free cash is cash flow from ops less all cap spending. So what's my starting free cash flow number going into 2017 now? Is it just simply $100 million and $150 million, you add $50 million to it and it's now $150 million to $200 million because of El Dorado or is it better than that?

So, first of all, Michael, many companies in our space calculate free cash flow this way. So this is not – we're not unique in this answer. And so – we do have a program. We had made a commitment to divestitures, whether that be the one we're talking about now, whether that be in connection with the Oil and Gas and Lodging business, whether that be other things that we have on the pipeline. So it's going to be part of our continuing program. What that exact number is for 2017 is tough to say. We'll have more clarity as kind of the year rolls on, but that will be part of our – the reason why we think it's appropriate to do it is because it is an ongoing strategy for cash flow, free cash flow generation.

And I would also say just Michael, on the DSO front, clearly we're dealing with a lot of distressed customers out there and a lot of customers that are really holding on to cash in the energy space. And so I think the team has done a really good job in some areas on the cash standpoint. But you've certainly extended some additional credit in some of your other energy-related customers; that's hurt DSO here. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. When we visited in May, you had mentioned a year-end goal of about 39% for blended, so you've gotten there. So, are you resetting the goal?

I think we're going to continue to see that number increase, whether we see it in the third quarter, but clearly by the end of the year, I think you will see an increase substantially. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. And then within the revision of the EBITDA guidance, if I look at it from a midpoint standpoint, you're down $20 million. Can you waterfall me what's contributing to $460 million goes to $440 million?

Yeah. Sure, it's really the Industrial and Field Services business continuing to have the level of softness. As we said in the last call, that was going to be down, let's say, 15% to 20%. Now it's kind of 30% to 35% and that continuing decrease, which as Alan mentioned in his calls and mentioned in earlier questions is that that is pricing pressures that we're experiencing in this business have continued to put pressure on our overall EBITDA. That and let's say Oil and Gas and Lodging continue – that's smaller numbers, but those are also down kind of from where we were, let's say, as we talked about this 90 days ago. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. And you would still hit the $5 million to $10 million that's coming from acquisitions doesn't – that's not a factor in this as well?

It's a good guide. But it is a factor in this. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. So I'm basically down through the $440 million and then I add back whatever I think the incremental contribution is from the deals on the backend versus divestment. Okay.

But you've got about $12 million I think of...

That's right, that's right. Alan, you made a good point, $12 plus million of severance and integration for the first half, plus another $3 million in Q3, in this number, in this number.

So you've got $15 million there, Michael, and that won't be there next year, you know... Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay, so this isn't quite as darn, this is bad. I mean I get the business conditions are weaker, but you're not sitting here running for the hills either.

Yeah. Michael, what I would say is that there were very good things in the quarter, with SK Environmental and KPP continuing to even beat our expectations, some things that were kind of on plan, maybe a little soft, like a Tech, and then there is other areas that were down considerably for reasons we mentioned. And so at the end of the day we missed by $3 million or $4 million, that's one or two contracts, as we heard earlier, one or two contracts, large contracts got disrupted maybe because of the fire. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: All right. And then in context of, if we do strip away the tough comparisons from upstream, how do you – can you revisit this? I know you've talked about it a little bit, but the traditional industrial and hazardous waste customer base, where are the strengths and where are the weaknesses as you sit here today?

Well, I think the weakness has been in the chemical side, a lot of our large chemical manufacturers from a utilization standpoint, particularly on the bulk side. So if you think about our Incineration business particularly and you think about the mix, we have a large drum business. Our drum business is doing extremely well. I mean the network that we have, the business that we're getting from the Safety-Kleen customer base, the containerized waste, our drum business is really, really strong. Our bulk business was weak and it's mainly weak particularly to do with our direct-burn customers with our chemical customers. And we think that business will come back. Our pharmaceutical customers, biotech; they're all relatively good. Manufacturing is sort of flat, the big manufacturing guys out there. Utilities has been doing okay. That industrial number that really hurt us and also drives some waste volumes into your plants, like we talk about in Alberta with our landfill, some of those industrial customers that shut down and stopped generating not only industrial needs, but wastes, those really have hurt us.

Yeah, Michael, I'd add to Alan's points – U.S. industrial production has been down for 10 straight months. That's just a fact. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Yeah, again, it's a lower rate of growth, but it's – but what you're – I think I'm hearing is you suspect growth just at a lower rate, on a sustained basis.

Yeah.

That's right.

Yes. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. And then Suncor in the second quarter in its 2Q results talked about $50 million in restart and cleanup costs for its operations. I'm gathering you didn't get any of that. And I would have thought that there was an opportunity for a lot of emergency response type work in Fort McMurray. So what's the opportunity for that at this juncture?

We have been doing quite a bit of emergency work. But as you can imagine, with the fire, quite different kind of needs for the community than maybe if it was a flood or an oil spill or something like that. We have been working on a large event recently up in Alberta. So we get our good share of oil spill cleanup work. We are doing a lot of in-plant work supporting those customers that you speak of that need everything from lodging to equipment, water. So we have had, I think, a good share of the event – it is a slow go up there in regard to what is actually going to happen in that market up there. There's been a slow move towards deciding on whether to build temporary lodges within the confines of the city, what people are actually going to be coming back to. Do they want to rebuild, are they doing to rebuild those kind of things? So I don't think Michael, you could say that we've lost necessarily – I think that just been a slow go in regard to what – let's face it, they've been going through the whole devastation in the energy market and now this. A lot of people have lost their jobs; now they've lost their homes. I mean, this has been a really, really tough market for people there. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for taking my questions.

Okay.

Thank you, Michael.

Our next question comes from the line of Joe Box from KeyBanc Capital Markets. Please proceed with your question.

Hey, good morning, guys.

Morning, Joe.

So the new EBITDA guide implies about $252 million to $282 million for the back half. Clearly 2Q is a tough quarter with the fire. And I get that you can't quantify. So can you maybe just give us a feel for how July has trended so far – I guess we're through July now, but how was July as a better barometer? And if you run rate that month, does that put you in line to hit the $252 million to $282 million or do you still need some things like the cost program to line up in order to get you to that $252 million to $282 million?

Hi, Joe. This is Mike. And I'll start. So I'd say that we didn't know that it is a back-half loaded plan and we do feel confident that that is and that's also – although we haven't not closed July yet, we're still in the process of our closing process on revenue and on earnings. And so we will have a good sense of – from what – when we give out the guidance, we check – kind of continually check all the way down the stretch, even to yesterday talking to the leaders in the finance team to make sure that we feel good about this. And I think the July numbers will bear that fruit. That being said, we are concerned about cost actions. We are continuing to execute on that. We are going to think strategically on what the next round of cost actions will be and there may be some that trickle into 2016, but that's not -

2017.

It trickled into 2016 and then kind of impacting us in 2017.

Okay.

I think that – so to your specific point, I feel good about kind of where we are now and our ability to hit the back half based on kind of where we are – from what we hear from our leadership team as late as yesterday.

Okay. That's fine. So maybe just let me dig into one of the bigger question marks, at least for myself personally, the Tech Services business. You're not expecting to be slightly down from 2016, but that implies revenue growth in the back half of the year. I mean, comps clearly get easier and you guys have a little bit of an incinerator backlog. But can you maybe just help us understand if it feels like this business has legitimately bottomed out or is it still kind of looking for a bottom?

No. I think we're – I would say our expectation is that business is going to continue to grow outside of the implications of waste going into our landfills and some of the bulk volume that I commented on. And coupled with the fact that we were a little bit reluctant this year to go out with price increases, as a result of new capacity that we're bringing on and we've been working to line up new contracts with customers, particularly ones that are looking at outsourcing wastes that maybe they're burning through that are captive There's a number of mergers going on that will have a disruption in the captive market. So we think we're in a pretty good position with our Tech Service business. And to some extent, as I mentioned, capacity-constrained, particularly in the Southern California market, so I'll think you'll see us pick back up our growth, particularly in some new markets that we're in now.

Okay. Got it. And then just a quick clarification on the cash flow guide. Mike, I think you said cash flow from ops is coming down. CapEx is also coming down, but free cash flow is staying at the same range largely because of the change in the way that you're calculating it. Just want to be clear. We're now including the $50 million from the planned divestiture. Are we going to include all divestitures going forward?

Yeah. I think this is the first time that we've done this. And as you know, we did a review two years ago and discussed this with our board. And so we've gone down this – this is the first time we've gone down this path. So I think we're not changing anything. We're just adopting what waste and some of the other folks do out there. And because we're – it's the first time we're really doing something like this here, so it's no change per se. But we would also say that there are other smaller niche businesses within the portfolio that you will probably see us doing something similar with on a move-forward basis. And so we're just trying to clarify how we're going to handle the proceeds of those.

Okay. But then assuming you will actually give us the planned divestiture amount that will be included in your free cash flow guide. That way, if we want to calculate it the same way that Michael referenced, we can technically do that.

Absolutely. And there's no hiding. I mean, our free cash flow this year is not where we want it to be six months through the year, but we're going to work our tail off. It is a key measurement for the leadership team and something that we're all absolutely paying attention to, whether it's working capital, an inventory management, all the things that go into that number. So we're going to continue to make that a priority for us. I mean the fact that we're at $200 million with the incinerator I think bodes well for where do we think next year is going to be and that's where you're going to continue to see an improvement in free cash flow.

Got it. Thank you, guys.

Yes.

Our next question comes from the line of Noah Kaye from Oppenheimer & Company. Please proceed with your question. Noah Kaye - Oppenheimer & Co., Inc. (Broker): Thanks. I guess this is really for modeling purposes. Can you help us think now about the cadence of the KPP build over the next several quarters and into 2017? I think you'd mentioned earlier you expected the blended percentage to be higher, but you just bought on additional refining capacity. So that sort of blended percentage, could that potentially get down a bit as you bring additional capacity, as you integrate additional capacity and start to integrate the networking – just sort of from a modeling standpoint, help us...

Yeah. (1:01:19) going to do that. I think we're going to close hopefully by the end of this week on three transactions here. And so – we'll try to circle back with the – with you on the third quarter call and try to give you a little bit more color on that. I think it's probably too soon to kind of change the denominator yet here.

Yeah, so we go through our budgeting process in the fall. And that will be – and we also – we made these acquisitions with the idea – part of the reason for it was part of the closed loop. So this is part of filling out that strategy. And so we do hope that as we go into 2017, we'll give you kind of a new number to work from. Certainly, we're confident in the back half of the year in the $20 million, $25 million range per quarter. We're hopeful that's going to expand and be a higher number going forward. Clearly, we're making these investments with that plan. Noah Kaye - Oppenheimer & Co., Inc. (Broker): Right. And does guidance for the back half still kind of assume that base oil prices stick around the $2 level reference prices?

Yeah, like we've done every other quarter. We take wherever we are now and just kind of run it forward and not try to speculate kind of up or down with the base oil prices. And frankly, as we've done a better job of managing our spread and our ability to kind of move CFO kind of quickly, we're hopeful that that's kind of in the rearview mirror as far as the impact and may affect one quarter versus another. But overall, we have a good process in place now to kind of manage that spread to continue to drive incremental EBITDA. Noah Kaye - Oppenheimer & Co., Inc. (Broker): Okay. And finally just the last one on this topic. You talked about a national launch in September. I know in the past, kind of trying to think about the ability of the closed loop to serve national accounts. You really emphasized the need to build infrastructure to make that possible. How much do the acquisitions kind of get you there? Are you now able to truly serve some of these national accounts? Or should we expect kind of like a more regionalized growth going forward? What do you think based off of customer conversations and off of your – what you expect the competencies will be after the integration?

From a blending and then manufacturing, we have the capacity we need now. On the distribution front, we still have well over 50 distributors that we partner with that can provide distribution for us. But we also have our own infrastructure. On the blended package side, whether it's drums or totes or other packaged materials, we will distribute that with our own vehicles to our own customers and not rely on distributors for those quantities. But for others, we're certainly going to continue to work with our partners and our distributors. So we have the ability. Noah Kaye - Oppenheimer & Co., Inc. (Broker): Thank you so much.

Yes.

Our next question comes from the line of David Manthey from Robert W. Baird. Please proceed with your question. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Hi, guys, good morning. Thanks for taking -

Good morning, Dave. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): So, on this closed-loop lube oil business, in terms of the customers that you're lining up, are these program buys with contracts with finite lives and volume minimums, or how does that work?

It's sort of a mixture with – starting out with sometimes it's in a trial and then you, moving people to a service plan and really get into a repetitive service model like Safety-Kleen has with 200,000-plus customers. So that's our plan. But also on large quantities, it would be on a contractual basis. It could be a year or three-year contract, so kind of it goes the whole screen. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Okay. In this particular program, you're focusing on bulk sales; this is not retail, right?

Yeah, directs. It's not retail shelf or anything like that. But direct to the customer. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): And in terms of your strategy – so I assume all of these customers are buying from someone else – are you pursuing a low-cost strategy, a low-price or how are you targeting the customer set with this offering?

I think you would characterize it by saying that we have about 110,000 waste oil customers, and obviously they're the ones that are buying products. And a number of them are interested in saving money by not having two different suppliers that have to truck material in and out of their facilities. So they see the real value of having us come and provide good service on the waste side and also on the delivery side. It's not necessarily a low price strategy per se; I think it's really a lower cost strategy for these customers by servicing their needs with one customer. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Okay.

We are hopeful to provide kind of a bundled service, right? So we're hopeful that we can – because our transient costs would be lower than anyone else, because we're already going to visit these customers, we're hopeful that we can to do it in one trip and save us money and save them money at the same time. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Okay. And then on the cost reduction, coming out of this year, you're saying you'll have $100 million and then there's another $100 million apparently following that. I'm just trying to size this relative to your entire cost stack. Looking at last year, if you take out D&A and just look at operating expenses, I think it was something over $400 million. And you're talking about taking out $200 million. And I know these are not all OpEx items, some of them are efficiencies or improvement in spreads and things like that. But these just seem like very, very big numbers, and I'm wondering if you can help us understand the areas that you'll be focusing on next to take out that magnitude of cost?

Well, the area of SG&A obviously continues to be an opportunity for us, and centralizing more of our customer service and some of our other back office is a real opportunity for us on the overhead side. Our transportation spend is about $180 million. Our rail spend, on top of that, is about $70 million, we're running about 1,800 rail cars today. So the whole Trans, Logistics, Distribution side of our business is a real opportunity for us as well. The maintenance that we have automated and internalized with our fleet and our equipment has really paid off for us. We've seen some really nice reductions on maintenance. We want to do that with our plants. We have over 450 physical locations, and so we're putting in a plan to address all of the maintenance spend across that entire network, from our largest plants to our smallest locations to really target some spending reductions in those areas. So we have that. I think coupled with the fact that with some of the acquisitions, we have a number of redundant locations in certain markets, so we continue to see opportunities to consolidate our footprint and still be able to leverage the infrastructure that we have. So those are some – hopefully that gives you a little bit of color. But we have well over $1 billion of expense here in a number of different buckets that we're targeting. David J. Manthey - Robert W. Baird & Co., Inc. (Broker): Yep. Okay. Thanks, that's helpful, Alan.

Okay.

Our next question comes from the line of Sean Hannan from Needham & Company. Please proceed with your question. Sean K. F. Hannan - Needham & Co. LLC: Yeah. Hi, folks. Thanks for taking the question here. So just want to see if we could maybe get an update in terms of what activity, if any or to what degree some of your customers' activity has come back in Alberta. What is that relative to where it was, and what are some expectations, and how do you think about that moving through the year and of course some of that's going to affect your Lodging here, too?

Certainly, Lodging has picked up. Customers now are starting up their plants and getting things back going again. We've been, I think, extremely busy in July, helping those customers get back on track. Mike, wouldn't you say -

Yeah, no, I agree with you. Again it's difficult to kind of measure the impact of the fire on our business, but clearly in Lodging, it's going to be a good guy; in Industrial, it will be a good guy as well. Exactly how much that is, is tough to say precisely, but I feel like both those things are coming back. The turnaround work that got delayed that Alan mentioned in an earlier question in Q2 is now back in Q3 and being done in Q3, and we're hopeful that that kind of gives us a bit of a lift here in the back half of the year and it's been our forecast for the year.

So a couple of these facilities went down real hard.

That's right.

Because of the fire and the urgency to evacuate and shut those plants down, these are enormous facilities. And when they go down hard like that, they have some real difficult time starting back up again. And so I would say that our activity has been very strong in that regard. Sean K. F. Hannan - Needham & Co. LLC: Okay. And then in terms of the carve-out, Oil and Gas and Lodging, you guys had an expectation to be able to – I think you've been very positive of the progress you're making around that. And it sounds like (1:11:06) disposition you have is going to be a different piece of business that you want to be able to have complete by the end of the year. So, just want to circle back on the carve-out.

Yeah. Sean K. F. Hannan - Needham & Co. LLC: And expectations around that? Thanks.

Sure. Our Upstream business, particularly to do with a lot of our early-stage exploration and seismic work and a lot of the rental and support on drilling, all of that Upstream, those assets and capabilities we have, we believe are extremely valuable and we realize that we're in the worst market that probably we've seen in 20 plus years. And so it's a difficult time to try to exit that business that we've decided to exit while we've seen what's happened in the last two years. And so we continue to do all of the right things, we think, in reducing our capital spending, reducing our costs, driving all the efficiencies we can to minimize our losses. Certainly in the second quarter, we got really hurt by the fire in that side of the business, as you know. But I would say that we have all the expectations that we're going to be able to execute on a strategy to deliver the carve-out and deliver shareholder value as part of that. And I just can't give you an exact time on that time, Sean, but it is absolutely something that we're working on every day.

Hey, Sean, this is Mike. So, nothing has changed. It's just it takes two to tango. And so we need to make sure that we're doing everything. We're still working as hard as we can to prepare for that as well as kind of focusing on trying to manage our cost structure. And so it's just a – nothing has changed from our previous comments on the carve-out, still plan to move forward, it's just the timing is a bit unknown at the moment and we're uncomfortable to kind of give you the exact date kind of where we sit today. Sean K. F. Hannan - Needham & Co. LLC: It seems like you had an identified entity, perhaps, that where maybe it was a scenario that you were making very good progress in being able to get to and perhaps finalize a deal. Is that an incorrect assumption on my part? Has there been any buyer walk away? Is it simply a pause and the rejiggering of terms based on current environment and just keeping that conversation warm? I just want to make sure I'm interpreting where that path has gone and really where it sits.

So, Sean, there really hasn't been a change in this structure. We're still working hard with potential – multiple potential partners, but still nothing has changed in that environment here. It is really – there's no buyer walk-away, as you mentioned. This is more of a – it really comes down to just competing priorities. As Alan said, we've done six acquisitions. We've done a disposition. It is a mindshare thing and that's all it is. And so nothing has changed in our endeavor. It is just X amount of hours in a day and X amount of people to do it. Sean K. F. Hannan - Needham & Co. LLC: Okay. Two last questions here. First, from a pricing standpoint, you're getting pricing pressure. We've heard about that mostly relevant to the Industrial and Field Services segment. Can you elaborate on that a little bit more to the extent that that's affected other areas such as within Tech Services? I think that sometimes, especially when you think about, say, landfill, and where volumes might be, and I think there might have also been some other scenarios within Tech where there is some other slight volume headwinds, can you help to lay out the price pressure picture for us a little bit more cleanly? Thanks.

I'll start by saying that I think the pricing pressures are real. And we've seen it here acutely in Q2 where you go – you read any headline around job loss and some of our end customers or some of our customers and the incredible struggles that they're on, they keep mentioning cost actions and minimizing suppliers, that's us. We are the suppliers, and so we are getting that. We are feeling the effect of that in our business. And so can I point to how much percentage is price versus – it's very difficult for us to kind of quantify that. We're winning our fair share of work. It's just the margin pressures that we feel are very real and open up the newspaper and you can see the same thing we're seeing. Sean K. F. Hannan - Needham & Co. LLC: So this can be relevant to incineration within Tech Services, this could be relevant to the maintenance work that you're going to be doing in Industrial. It's really kind of across the board.

We really haven't seen it in Tech. I think that's just a volume thing. I think Tech is – we are – we recognize the fact that price is important there. We haven't really – we haven't gone soft on price there and it's not really an impact on the overall loss. The margins are down a little bit, but that's more on kind of volume and utilization versus price. Price is, as I speak to price, it really is an industrial field, Western Canada Oil and Gas/Lodging is where we're kind of acutely feeling the price in the quarter. Sean K. F. Hannan - Needham & Co. LLC: Perfect clarification. Thank you. Certainly on the Tech side, that was important to hear.

Yeah. Sean K. F. Hannan - Needham & Co. LLC: And then the last thing, so you had brought up that in terms of closed loop, being able to get to 100 million gallons from a blended and patching standpoint, what is your number today? Pre-acquisitions?

Gallon wise, I don't have that. Is it 40 million, roughly? I think it might be about 40 million gallons today. I don't have the exact number here, Sean.

We don't have the exact number, Sean. We can come back and... Sean K. F. Hannan - Needham & Co. LLC: Well, it's more than doubling, so that's a pretty good addition there.

Yes.

Yes sir. Sean K. F. Hannan - Needham & Co. LLC: Thank you. Thanks, so much, folks.

Thank you.

Thanks Sean.

Our next question comes from the line of Tyler Brown from Raymond James. Please proceed with your question. Patrick Tyler Brown - Raymond James & Associates, Inc.: Hey, good morning, guys.

Hi, Tyler.

Hi, Tyler. Patrick Tyler Brown - Raymond James & Associates, Inc.: Hey, I know the call has been long. I'll just keep it to a couple. But on Kleen performance, you guys noted that CFO, I think, improved $0.08 sequentially, but if I recall it, the time of the Q1 call, it was tracking maybe more than $0.10 better in April and May versus Q1. I guess my big picture question is did your CFO slip somewhat late in the quarter and are you seeing any pushback from the UMO generators?

I think when oil gets to 53, you're – again, we're trying to manage our spread and... Patrick Tyler Brown - Raymond James & Associates, Inc.: Yeah.

And so for a couple of customers, maybe it's upped a little bit here. But in general, it might be more reflective of the acquisitions and picking up some of the business that we're picking up and what pricing we have from them. And overall, I would say that we're holding firm on both our stock fee and our charge-for-oil program. And with crude now under $40 again, I think customers can appreciate where we're at and why we need to be where we're at.

Yeah, Tyler, just to echo that comment. Again, we are trying to – we still give the data and we're happy to kind of answer your questions on it, but really it's a spread business. We're trying to manage that spread. As prices go up, it's not shocking, we're going to do our best, CFO will go down. As prices go down, CFO will go up. I mean, we have a process in place. People are well aligned to that answer and so we feel confident that that spread will be managed effectively. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. But to be clear, is $217 million the base to lube price that's embedded in the guidance?

Yes, sir. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. And then lastly going back to Joe Box's question, did you guys hit your July budget?

Again, we haven't closed July, so it's very difficult to give an exact, how we're doing in July. I'd say that – again, as I mentioned to Joe, I go and ask all the leaders of the businesses and the controllers kind of what's up, anything new, anything different and they seem very confident. Patrick Tyler Brown - Raymond James & Associates, Inc.: Okay. All right. Thanks guys.

Thank you.

Our last question comes from the line of Michael Hoffman from Stifel. Please proceed with your question. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Hi. Just two follow-ups. On the $100 million cost cuts you had planned on...

Hello, Michael, have we lost you?

There we go.

One moment.

Michael, you're back. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Hi, sorry. Can you all hear me?

We got you now, Michael.

Yeah, we. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. No problem. So, as a follow-up, in the original guidance, you had assumed $50 million would be booked of the $100 million in cost saves. What's that target now within the context of a guidance?

I mean, I think we're still kind of in line with that answer. Again, Alan spoke of the kind of – let's say the next $100 million. I think there's just going to be – I think there are some savings in 2016. I think we're actively kind of working that answer. As Alan mentioned, we're very specific as to what we're trying to target. And so there's opportunity there, exactly how much is in our guidance number, I think it's very little. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. So...

For the second $100 million.

For the second $100 million. On the first $100 million, I think, again as Alan said, we're doing very well on that. I think we're going to exceed that target by a bit. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay, but the original guidance is $430 million to $490 million – had $50 million was the underlying assumption, you're still using $50 million, you might exceed it.

Yes, sir. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay. I just wanted to make sure that was clear. And then – I absolutely – I'm on board with the idea that you're managing a spread business. And so what's the spread differential year-over-year, one? And, two, should we be careful? When you say $2.17, that's the posted price, you're not being paid $2.17. You're paying at a discount to the $2.17?

That's right. That's right. But that's a known fact there's a discount off of... Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Yeah. I just want to make sure nobody is walking away going $2.17 times so many gallons. Yeah, okay. All right, back to the spread. What's the spread differential year-over-year?

Again, just one clarification. That's a base oil pricing. So we're trying to move volume into the blended side of our business, which is a totally different price – so just want to clarify...

That's right. Good point... Michael Hoffman - Stifel, Nicolaus & Co., Inc.: That might be $4, but the spread on that is $1 in comparison to – in the base oil business.

Base oil, two and a half years ago was closer to $4.25. So it's a long way to go from where it used to be and we are still dealing with relatively thin, thin margins by selling a commodity based oil from our waste that we're re-refining. So I just want to make sure that I clarify that. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Fair enough. Now back to the original question. What's the spread change? Because it's important. You've improved the spread year-over-year.

Clearly. And so again, as we ended the year in the $20 million, $25 million range of EBITDA in Q3 and Q4, the KPP business with hopes of – so that's based on the current CFO and the current base oil prices and the current closed-loop rollout and everything else we got going on here in the acquisitions and the integrations of those acquisitions. So to say what the number is kind of going year-on-year, it's kind of tough to put an exact, kind of exact number as to what that expansion is. Clearly, we went from $5 million in Q1 to $10 million in Q2 and now we're in the $20 plus million in the back half. So that tells you kind of what the goodness we can generate on that spread expansion can be. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Okay.

Hopefully, that gives you color, Michael.

That gives you some color, Michael. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: It's not quite horseshoes, but it's close. Okay.

All right. Thank you.

Thank you, Michael. Michael Hoffman - Stifel, Nicolaus & Co., Inc.: Thanks.

Thank you.

There are no further questions in queue. I would like to hand the call back over to management for closing comments.

Well, thank you all for joining us today. We hope you enjoy the rest of the summer. We'll catch up with many of you in person during the fall conference season. Have a good day.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.