Heritage-Crystal Clean, Inc
Q1 2018 Earnings Call Transcript

Published: 3 May 2018

[Operator:]

Good morning ladies and gentlemen and welcome to the Heritage-Crystal Clean, Incorporated First Quarter 2018 Earnings Conference Call. Today's call is being recorded. At this time, all callers' microphones are muted, and you'll have the opportunity at the end of the presentation to ask questions. Instructions will be provided at that time for you to queue up for questions. We ask that all callers limit themselves to one or two questions. Some of the comments we will make today are forward-looking. Generally, the words aim, anticipate, believe, could, estimate, expect, intend, may, plan, project, should, will be, will continue, will likely result, would, and similar expressions identify forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include a variety of factors, some of which are beyond our control. These forward-looking statements speak as of today, and you should not rely on them as representing our views in the future. We undertake no obligations to update these statements after this call. Please refer to our SEC filings, including our annual report on Form 10-K as well as our earnings release posted on our Web site for a more detailed description of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our Web site. Also, please note that certain financial measures we may use on the call, such as earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA, are non-GAAP measures. Please see our Web site for reconciliations of these non-GAAP financial measures to GAAP. For more information about our company, please visit our Web site at www.crystal-clean.com. With us today from the company are President and Chief Executive Officer, Mr. Brian Recatto; and the Chief Financial Officer, Mr. Mark DeVita. At this time, I would like to turn the call over to Brian Recatto. Please go ahead, sir.

[Brian Recatto:]

Thank you, and welcome to everyone joining us this morning. Last night, we reported our first quarter 2018 results. We recorded a basic loss per share during the quarter of $0.01 compared to basic earnings per share of $0.21 in the first quarter of 2017. It's important to remember that our first quarter 2017 results included a nonrecurring gain from an arbitration award worth $0.16 per share. Our revenues for the first quarter increased 3.3% compared to the first quarter of 2017, $83.1 million, driven mainly by 8% growth in our Environmental Services segment. Mark will provide more financial details in a moment, after I review various aspects of our business. I would first like to discuss the results in our Environmental Services segment. From a revenue standpoint, I am proud of the fact that we delivered high single-digit growth through our continued focus on industrial customers, cross selling initiatives, and additional sales and service resources. All of our lines of business in this segment experienced growth on a year-over-year basis despite very difficult weather conditions. Our revenue growth in 2018 has been aided by the 5 new branches we added during 2017 as well as the sales and service resources such as branch sales managers, antifreeze sales and service reps, vacuum sales and service reps, ESP specialists and field services reps we added throughout 2017. The cost incurred during the first quarter of 2018 associated with the new branches and resources added during 2017 was approximately $2.1 million from which we generated approximately $2.3 million in revenue. Looking forward, we plan to continue to add new branches as well as sales and service resources in this segment. We estimate that we will incur almost $2 million of new cost for resources to be added during fiscal 2018. We anticipate these additional resources will generate almost $1.7 million of revenue during the year. Our Environmental Services' operating margin in the first quarter of 2018 was 23.1% down from 28.1% in the same quarter a year ago. The decrease in margin was mainly due to a spike in disposal and transportation costs. From a disposal perspective, we were forced to utilize a secondary disposal outlet for material portion of our commercialized waste material during the first quarter due to an outage at one of our main third party disposal sites leading to the higher costs. In addition, we experienced higher than usual costs related to the disposal of aqueous parts cleaning waste [ph] during the first quarter, primarily because of the unusually cold weather in Indianapolis. The good news is that our main third party disposal outlet has now returned to normal operations and we're no longer dealing with frozen waste drums. This should allow us to bring disposal costs back to previous levels. Transportation costs in our vacuum business, which utilizes railcars to deliver waste to proper disposal outlet were negatively impacted by the challenges we faced in rail logistics due to the unplanned downtime experienced at our re-refinery during the first quarter, which I will discuss further in a minute. However, we are confident the steps we've taken early in the second quarter will allow us to reduce these costs relative to our revenue and give us the opportunity to restore our operating margins back to the level we experienced during the second half of fiscal 2017. Moving on to our Oil Business now; as we alluded to during our fourth quarter earnings conference call, we encouraged significant unplanned downtime at the re-refinery during the first quarter. Low feedstock levels combined with record low temperatures in Indianapolis during January placed undue stress on our operating equipment and forced us to shut down our re-refinery for the equivalent of approximately 20 days. This downtime lead to a lack of production and higher maintenance costs during the first quarter as well as less leveraging of our fixed costs at our re-refinery. The unplanned downtime also caused a ripple effect across our logistics network, which lead to overall higher transportation costs. As a result of these challenges, we operated the re-refinery at a rate of 75% of our nameplate capacity during the first quarter compared to 96% during the fourth quarter of fiscal 2017. Looking forward, we operated the re-refinery at capacity during the first full weeks of our second quarter and we expect to run the re-refinery at a mid-90s percent rate for the second quarter. During our fourth quarter earnings conference call we talked about how our netback for base oil had trailed the market primarily due to a force majeure event. As expected we saw an increase in our base oil netback during the quarters, specifically, our base oil netback increased by $0.19 per gallon from the fourth quarter of 2017 to the first quarter of 2018. Even more promising during the last full weeks of the first quarter, our base oil netback was $0.12 per gallon, higher than our average for the first quarter. As you might expect with the rising price of crude oil and residual fuel, we continue to experience pricing pressure in regard to our cost to collect used oil. During the first quarter, on average, we paid our customers for their used oil. The change in our weighted average street price during the fourth quarter of 2017 compared to the weighted average price we paid our customers during the first quarter of 2018 was $0.12 per gallon. The first quarter was the first time since the third quarter of 2015 that we've paid our customers for their used oil on a weighted average basis. While we still charged a fee for a majority of used oil collection services we performed during the first quarter, the market continues to be very competitive, especially for large volume customers. If crude oil and residual fuel prices stay in their current range, we would expect to continue to pay our customers for collection of used oil on an overall weighted average basis. We are working hard to overcome the obstacles which lead to our underperformance during the first quarter. Thankfully, most of those challenges are short-term and we expect to see improved operating margins in both of our reporting segments in the second quarter. That helped drive continued growth in our antifreeze business. We are happy to report that we closed on our first acquisition of 2018, earlier this week. The acquired company is primarily engaged in the collection and recycling of spent antifreeze as well as the selling of a full line of antifreeze products and its operations are within our current service territory. The annual revenue of the acquired business is expected to be approximately $7 million. We will continue to pursue multiple additional tuck-in acquisition opportunities and hope to close on several of them during the remainder of 2018. Mark will now walk us through our first quarter financial results in detail.

[Mark DeVita:]

Thanks, Brian. I'll start by discussing the Environmental Services segment. In the first quarter of fiscal 2018, Environmental Services revenues increased by approximately $4.3 million or 8% from the $53.2 million in the first quarter of fiscal 2017 to $57.5 million in the first quarter of fiscal 2018. We experienced higher revenue in all lines of business in this segment. The revenue growth was a result of price gains in some of our businesses and volume increases in others. In the parts cleaning business, we experienced price gains, which more than offset a slight decline in volume. The volume decline was felt in the solvent and parts cleaning portion of the business as our aqueous parts cleaning business continued to show strong growth. In our containerized waste business, we experienced strong volume growth with a slight decline in price and service mix. While on the vacuum services business, we experienced improvements in volume as well as pricing service mix. Same branch revenues grew approximately 7.8% on a year-over-year basis during the first quarter. Profits before corporate SG&A expense in the Environmental Services segment was $13.3 million. Our first quarter operating margin was 23.1% compared to operating margin of 28.1% in the first quarter of 2017. On a year-over-year basis, disposal costs were $1.4 million higher and labor and transportation costs combined was $2.3 million higher compared to the first quarter of 2017. These costs overrun the [indiscernible] 75% of the five percentage points decline in our operating margin. While higher labor costs were expected due to our investments in new resources to grow their various businesses in this segment, the higher disposal and transportation costs were not. Brian mentioned some of the reasons behind the higher disposal and transportation costs. We expect these costs to decline as a percentage of revenue beginning in the second quarter, the results of which should be improved operating margin. In the first quarter of fiscal 2018, although business revenues were down $1.6 million and 5.8% compared to the first quarter of fiscal 2017, the revenue decrease was due to unplanned downtime at our re-refinery and significantly lower charges to customers for our used oil collection services. From a base oil perspective, we sold approximately 8.1 million gallons of base oil during the first quarter of 2018 compared to 9.6 million gallons in the first quarter of fiscal 2017. Lower sales volume was due to a decline in base oil production of 1.8 million gallons during the first quarter of 2018 compared to the first quarter of 2017 due to the unplanned re-refinery downtime mentioned earlier. We also sold approximately 1.8 million gallons of RFO during the first quarter, which was down 28% to 0.7 million gallons compared to the first quarter of fiscal 2017. Turning now to income before corporate SG&A expense, all business income before corporate SG&A expense decreased $2.3 million in the first quarter from $0.9 million in the first quarter of fiscal 2017 to negative $1.4 million in the first quarter of fiscal 2018. Oil business segment operating margin was negative 5.4% in the first quarter of 2018 compared to 3.4% in the first quarter of 2017. The negative operating margin for those quarters was due to poor leveraging of fixed costs as well as higher maintenance and transportation costs caused by unplanned downtime at the re-refinery. The impact of higher feedstock costs was almost completely offset by higher base oil price on a year-over-year comparative basis. Higher transportation and maintenance costs account for almost two-thirds of the market deterioration on a year-over-year basis. Site closure costs of $0.3 million also contributed to lower operating margin during the first quarter. Our overall corporate SG&A expense as a percentage of revenue was 14.2% compared to 16.4% from the year ago quarter mainly due to lower legal fees and lower expense from incentive compensation. The company's effective income tax rate for the first quarter of 2018 was 81% compared to 37% from the year ago quarter. The rate difference is typically attributable to the different treatment for financial reporting and income tax reporting of equity compensation. The unusually high first quarter effective income tax rate is also influenced by the new break even increase tax law result, which occurred during the quarter. We still expect our income tax rate to be in the mid-20s percent range for the full fiscal year of 2018. First quarter EBITDA of $3.4 million was $8.4 million lower than the year ago quarter. EBITDA for the first quarter of fiscal 2017 included a onetime $5.1 million gain resulting from an arbitration award. First quarter 2018 adjusted EBITDA was $4.2 million compared to $8.1 million in 2017. Turning to the balance sheet, cash on hand at the end of the quarter stood at $37.6 million compared to $41.9 million at the end of the fourth quarter of 2017. And total debt stood at $28.8 million compared to $28.7 million one year ago. We intend to use our excess cash balance to seek additional acquisition opportunities as well as pursue capital projects, self-drive revenue growth and improved operational efficiencies. I want to thank everyone for their interest in Heritage-Crystal Clean. Now I'll turn control of the call over to our operator to advise you of the procedure to submit your questions. Operator?

[Operator:]

Yes…

[Brian Recatto:]

Operator, are you there?

[Operator:]

Thank you. [Operator Instructions] And our first question comes from the line of William Blair -- from Ryan Merkel. Your line is open.

[Ryan Merkel:]

Hey, good morning, everyone.

[Brian Recatto:]

Hey, Ryan, how are you?

[Ryan Merkel:]

Good. So, a couple of questions from me, so first on the oil business, you mentioned significantly lower charges to customers for used oil collections, can you tell us how much lower, year-over-year for the charges?

[Mark DeVita:]

What we were actually been given, Ryan that you're probably familiar with was sequentially we talk about it. So it was the delta between what we were charging in Q4, so Q4, 2017 compared to then we swung into a pay this past quarter first quarter of 2018, that delta was $0.12. So there was $0.12, I guess, net deterioration on a weighted average basis, does that make sense?

[Ryan Merkel:]

Yes, got it. Okay, I remember…

[Brian Recatto:]

-- don't forget correspondingly we picked up 19% in our base oil netback.

[Mark DeVita:]

$0.19?

[Brian Recatto:]

$0.19, yes, that's -- okay.

[Ryan Merkel:]

All right. Because I'm going back to the last call and I think you said that economics in the oil business for the best had been in five years, is this still the case, or has something changed?

[Mark DeVita:]

I think, base oil, yes, it still is. I think we tried to accentuate or Brian did about our policy exit velocity in price. I mean, we had that $0.19 increase but we talked about how the last four weeks of the first quarter were especially good, they were $0.12 higher than the average that we had had for our average netback for the quarter. So we think those are really good. One thing that we did talk about, to go off on a small tangent, we talked about in the last quarter on the front end of that spread how there were improving conditions in the pricing of residual fuels versus crude oil. And unfortunately that has started to turn. In fact, we would often talk about how when things were more stable number six oil for instance was at a price point between 80% to 85% of what WTI was, and when we were on the call here in March, it had started to dip back. It had been way elevated throughout '17, but it's started to come back close to that. Well, now if you go up the last several days, it's back up to 91%-92%. So things are still good and really good. We just had a couple of price increases announced on base oil within the last week, but the front end of the spread there's still that pressure.

[Brian Recatto:]

But Ryan, we're not expecting any spread deterioration quarter-over-quarter because of the base oil price increases.

[Mark DeVita:]

Yes, we would expect probably to get a little bit better.

[Brian Recatto:]

Yes, we would.

[Ryan Merkel:]

Okay, that's really what I'm getting at. Okay, that's good to hear. And then --

[Brian Recatto:]

I mean, our problems in oil in Q1 were for obviously production. I mean, we only produced -- only sold 8 million gallons of base oil. Due to the 20 days of downtime, we expect that number to be much better in Q2. Right now, we're forecasting a 3 million gallon increase quarter-over-quarter in production.

[Ryan Merkel:]

Okay. And then just lastly two-part question on the ES business, can you quantify how much did the outage at the third-party disposal site, how much of that lead to higher costs? And then you mentioned you're taking steps to lower costs. I don't know if you said it, but can you talk about what those steps are?

[Mark DeVita:]

Yes, I'll take the first part of that. On a per unit basis if you compare the pricing that we had with our primary vendor to the secondary vendor that we're using for a lot of our hazardous wastes is what it was, and I'm coming at it real generically here, but on the liquid pumpable type stuff, our secondary vendor is about a third higher in price. And on more of the solids they're 50% plus more. So that gives you an idea -- I mean, Brian went over -- when we went over in our prepared remarks, the actual dollar impact in the quarter, but on a percentage basis, you can see how that can be punishing.

[Brian Recatto:]

And Ryan, we're redirecting all of that waste back to our primary vendor now that they're back up and running, but that does take a little bit of time logistically and we're in the process of making that happen now.

[Ryan Merkel:]

Got it. Okay, thanks I'll pass it on.

[Brian Recatto:]

Thank you.

[Mark DeVita:]

Thanks.

[Operator:]

Thank you. And our next question comes from the line of Luke Junk from Robert W. Baird. Your line is open.

[Luke Junk:]

Good morning, guys.

[Brian Recatto:]

Hey, Luke, how are you?

[Mark DeVita:]

Hey, Luke, how are you?

[Luke Junk:]

I'm doing well, thanks. First question back on the oil business, obviously, we had the issue in the fourth quarter with the force majeure and whatnot in terms of your ability to raise price to your customers as the market was moving up. I just want to clarify, I mean, that sounds like it was one-time in nature and obviously your price is moving up now. Should price continue to move up [technical difficulty] something that could crop up again or was that in fact just sort of a one off kind of thing?

[Brian Recatto:]

No, the force majeure was a one-off issue related to Hurricane Harvey. We don't expect to see that issue again.

[Mark DeVita:]

I think we talked about some changes we made, so we're not centric on effectively was it written that way but effectively several of our contracts for the committed volume or contracted volume we have tied almost to one facility, and we're working to change that, I think we did.

[Brian Recatto:]

We have two of our…

[Mark DeVita:]

Yes, we just have one last step it's going to be a little later in the year that we modify or certainly into next year that will be done.

[Luke Junk:]

Okay, it's helpful.

[Mark DeVita:]

So we don't have a big force majeure event. If we got another one it would be muted. We might have a little bit impact between now and then, but that would be it.

[Luke Junk:]

Okay. That's my side; I just wanted to make sure. And then second on the ES business, Mark you made some comments in terms of the price realization across the product lines, just curious how that sorted versus your expectations and I know you mentioned one area where cost is little bit negative, where you're expecting that?

[Mark DeVita:]

We have been a little bit more aggressive in our [indiscernible] business. So that wasn't unexpected. So it wasn't -- and I guess I could -- but when we saw that number that we want to also have price there with the double-digit volume gain we had, sure, but we're not alarmed, it's pretty minor.

[Brian Recatto:]

And I think we've been consistent with that and our prior calls, which is a strategy of ours to aggressively pursue new industrial client as it offers the best opportunity for us to cross-sell multiple services.

[Luke Junk:]

Okay, that makes sense. And then lastly, Brian, you had said in terms of the investments in sales and service resources $2 million of cost and about $1.7 million of revenues, just to clarify I assume you meant cumulatively over the rest of the year, is that right, or you're speaking more in a run rate basis? Thanks.

[Brian Recatto:]

No, I think the key is -- you were talking about the one that had last year.

[Luke Junk:]

Yes, that's right.

[Brian Recatto:]

So we really had nothing hardly at all that '18 that, so I mean there is a little bit, we had one branch that started at the end of the quarter that goes about it.

[Mark DeVita:]

The bulk of our 2018 actually be in the back half of the year, which is consistent with what we did last year as well.

[Luke Junk:]

Okay, that's helpful, thank you.

[Mark DeVita:]

Thank you.

[Operator:]

Thank you. And our next question comes from the line of Brian Butler from Stifel. Your line is open.

[Brian Butler:]

Good morning, thanks for taking my questions.

[Mark DeVita:]

Welcome, Brian. How are you?

[Brian Recatto:]

Hey, Brian.

[Brian Butler:]

Doing good. Just to be clear, just that 75% utilization, what is the nameplate capacity right now on the facility?

[Brian Recatto:]

Yes, we're not changing it, what we've talked about last conference call, the $47 million that is your denominator if you want to get real mathematical.

[Brian Butler:]

Okay, I just want to make sure on the same pace.

[Brian Recatto:]

We would be very formal in communicative if that ever changes.

[Brian Butler:]

Okay. And on the base oil price, I mean you gave some color on the netbacks but could you give a little bit more clarity just on how much was base oil price up for you guys year-over-year versus first quarter because I mean clearly base oil sales were down significantly and the total revenues weren't that bad, so I'm guessing pricing was up, I'm just trying to get some visibility.

[Brian Recatto:]

Yes, year-over-year the netback was up about $0.50.

[Brian Butler:]

Up about $0.50, all right and then on the growth and the environmental services piece, so you had you said the last year was $2.1 million in cost and that was driving on an annualized $2.3 million in revenue, did I get that correct?

[Brian Recatto:]

That wasn't annualized.

[Brian Butler:]

That was just in the first quarter?

[Brian Recatto:]

Yes.

[Brian Butler:]

And that's what's driving the 8% growth, so again looking for that kind of spending that's what is going to keep you guys in the high single-digits? Is that still the expectation with where the market is right now?

[Mark DeVita:]

Yes, that is still our expectation.

[Brian Butler:]

All right, I'll hop back in the queue. Thank you.

[Mark DeVita:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from the line of Kevin Steinke from Barrington Research. Your line is open.

[Kevin Steinke:]

Good morning.

[Mark DeVita:]

Hi, Kevin.

[Kevin Steinke:]

On the Environmental Services margin, you talked about the kind of normalizing now that you're getting past these higher transportation and disposal cost, should we still expect going forward though that there'll be some margin compression from the investment in sales, resources maybe in that I don't know 300 basis point range year-over-year or how you're thinking about that?

[Mark DeVita:]

I think, Kevin, that we're still guiding to the 27% number obviously we've got some transition warrant that we had to do during the second quarter to get us there. As we redirect the way strange back to our primary vendors and better manage logistics minus the issues that we have with our rail fleet because of the downtime of the re-refinery. So we're still consistent in our thoughts and we expect to begin to see those numbers again in Q3 with an improvement in Q2.

[Kevin Steinke:]

Okay, all right. It's helpful. And I'm just trying to make the connection here when you talked about transportation costs in the vacuum business being impacted by challenges in rail logistics related to the unplanned downtime it's a re-refinery. I don't know if you could just clarify the connection between those two?

[Brian Recatto:]

Yes, I can do that. We move our ways waters to in disposal sites utilizing railcars. We obviously have depots and wastewater treatment plants. So, on the field, we're collecting at retail using our backyard. We bring it into one of our depots and wastewater treatments plants ultimately have to get it to an end disposal site of it's not at one of our facilities and when the rail fleets tied up with use most of all because you can offload it in the full tank form. We have to conduct what we call hot downs out in the field and redirect it using an over the road vacuum truck which are necessarily as our cost. The alternative being that we would utilize our rail fleet to move that material around.

[Mark DeVita:]

Kevin, I'll give you a similar scenario, if we're branch out that typically would offload into a railcar and go into one of our facilities again which has been saving us money generating savings as a less 12 plus months and that railcar is it available. They must has to go to external or vendor third-party to rest at an elevated cost, so that all kind of that's the ripple effect and a negative impact on ES margins that unfortunately to led from re-refinery issue.

[Brian Recatto:]

And I think we've talked about this on prior calls. Our vacuum business is growing. We have a hundred backyard so it's an total component of what we do in the rail logistics place a meaningful role and disposal.

[Kevin Steinke:]

Okay, Yes. That's helpful. so the impact on the oil business margins in the quarter you talked about 400 basis points I believe from the unplanned downtime at the re-refinery on the that maintenance and transportation costs. And on top of that are with the unplanned downtime have more of an impact than you thought. Just try to so?

[Brian Recatto:]

Certainly from what we thought sitting here a couple months ago, not only was production down a little more than we thought. We get less leveraging but the maintenance cost and transportation was the biggest one was you're just reiterated I mean if you look at transportation and maintenance cost alone if you're comparing sequentially our margins is those were almost two-thirds of the reason why we underperformed margin-wise.

[Mark DeVita:]

Yes, we insured 2.7 million gallons of production.

[Kevin Steinke:]

Yes, Okay. And then with the now you moving, you moved into a situation where you are now paying customers on average. It's just give us a sense of but you're also benefiting from greater net facts on the based sales just kind of give us a sense of how those factors will work together and factor into your oil business margins over the next couple of quarters here?

[Brian Recatto:]

We expect that to albeit positive impact on a net basis to our margin, there is a volume difference. That's why kind of look at some of the numbers that we've talked about here today you might say all on that has been positive already. We see some stability recently and again it can change but we've seen some stability in our PSO, I guess, as you call it now and there're definitely tailwinds and we've talked about on the price side. So even though, it was that volume, the yield we're going to still expect to see improvement overall not just in that spread because you need more than improvement in the spread case of the volume differential. But overall positive impact on the margin from the improvement spreads.

[Kevin Steinke:]

Okay, all right. I'll leave it there for now. Thanks for taking the questions.

[Brian Recatto:]

Thank you.

[Operator:]

Thank you. And our next question comes from the line of Gerry Sweeney from ROTH Capital. Your line is open.

[Gerry Sweeney:]

Thanks, good morning guys, how are you?

[Brian Recatto:]

Hi, Gerry, how are you doing?

[Mark DeVita:]

Hi, Gerry.

[Gerry Sweeney:]

Doing well, thanks. Lot of question to answer but could you give me maybe a little bit of due maybe on the macro picture looking out for base oil. Looking out for the summer, obviously we're going into the summer season, I think there is more demand, price has been ticking up, does the market look supplied, under supplied et cetera, any outages as to things like that just from a macro perspective?

[Brian Recatto:]

Yes, from a macro perspective we feel good about base oil price even as we look out into second quarter, the early part of Q3 I mean it's hard to have visibility beyond that, there is a pretty robust export market. Yes, we're seeing a little bit of supply increase in some of the majors but not in that concerns high feedstock prices for the majors, we'll continue to force them to look at price increase as Mark mentioned earlier that we had a 20% price increase.

[Mark DeVita:]

$0.20.

[Brian Recatto:]

Yes, $0.20 on that price today, $0.20 price increase back up with the majors that we will follow-up on shortly actually next week. So overall we feel good about base oil macro.

[Gerry Sweeney:]

Okay.

[Brian Recatto:]

High demand for this product.

[Gerry Sweeney:]

Yes, and then just I guess PFO paper oil now, obviously the downturn always talked about page, the benefit of charging oil and sort of hanging on to this price is now they're working their way backup. Are you disappointed in I guess the rate of change, or this is what you expected? And in general competitors dig in the heels in and trying to raise prices slowly or there some bad occurs out there little less price discipline?

[Brian Recatto:]

Yes, I think you're always going to see that the regional players are a little less price discipline than we or overall we still consider ourselves to be the price leader. We're still charging for oil at the local level for smaller retail generators. I think Mark mentioned that in his prepared remarks our larger corporate accounts that have buying power and larger volumes. We're having to pay for that oil that's why you're seeing an overall pay for all in our program but overall I think in general I'm happy with the work of the field has gone to maintain at local shortfalls, but I'm not disappointed.

[Mark DeVita:]

I think if you take a longer perspective we talked about based some of our street charges we're still I think far from a situation where that residual fuel and have been driven my crude moved in a certain direction that we couldn't go right back into a weighted average charge because we did charge fair amount of our customers during the quarter. It's one of those things where it's more than fresh. It's not as if he'd been in a PFO or Pay for Oil market as an industry for years. And that's was one of the challenges back in 2014-2015 was then it's been a while. So those dynamics don't go away. It's still available to us. But I think Brian said it right, your regional or local guys tend to be little more -- they're not their public; they don't scrutinize as it much, so…

[Gerry Sweeney:]

Okay, that's helpful. So I mean at the end of the day it sounds like I mean the psychology in the last go around is not necessarily there, you know, if dynamics change, it could be an easier move back to charge from oils like as what you said…

[Brian Recatto:]

I think it will be seamless, to be honest. It's really just commodity-driven at this point. There is no added barrier. At some point, if you got high enough or long enough, then that could reappear or reform.

[Gerry Sweeney:]

Okay. Got it. Perfect. I appreciate it. Thank you.

[Brian Recatto:]

Thank you.

[Mark DeVita:]

Thanks.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a nice day.